# Chapter 4 Demo Problems and Review Sheets

```Name
CHAPTER 4
Date
Class
Chapter Outline Notes
Transactions That Affect Assets, Liabilities, and Owner’s Capital
A. The Chart of Accounts
• chart of accounts—a list of all accounts used by a business
• a chart of accounts is organized as a table
• An account is a record of changes and balances.
• ledger—a group of accounts
• the ledger is often referred to as the general ledger
• A numbering system makes it easy to locate individual accounts in the ledger.
B. Double-Entry Accounting
• double-entry accounting—recognizes the different sides of a business transaction
as debits and credits
• debit—an entry on the left side of an account
• credit—an entry on the right side of an account
1. T Accounts
• T account—shows the increase or decrease in an account from a transaction
• A T account has an account name, a left side, and a right side.
• Accountants sometimes use DR for debit and CR for credit.
2. The Rules of Debit and Credit
• for each debit entry in one account, a credit of an equal amount must be made in
another account
• The left side is always the debit side; the right side is always the credit side.
• normal balance—an account’s usual balance; always on the side used to record
increases to the account
a. Rules for Asset Accounts
• increased () on the debit side (left side).
• decreased () on the credit side (right side).
• normal balance is the increase, or the debit side.
b. Rules for Liability and Owner’s Capital Accounts
• increased () on the credit side (right side).
• decreased () on the debit side (left side).
• normal balance is the increase, or the credit side.
Section 2: Applying the Rules of Debit and Credit
1. Identify each account affected.
2. Classify the accounts affected.
3. Determine the amount of increase or decrease for each account affected.
4. Determine which account is debited and for what amount.
5. Determine which account is credited and for what amount.
6. Complete the entry in T account form.
B. Asset and Equities Transactions
1. Assets and Owner’s Capital
2. Assets and Liabilities
24 ■ Chapter
Spanish Outline
Language
Notes
Resources
Section 1: Accounts and the Double-Entry Accounting System
Name
Date
CHAPTER 4
Class
Demonstration Problems
Transactions That Affect Assets, Liabilities, and Owner’s Capital
PROBLEM 4–1 Ordering and Numbering a Chart of Accounts
The following accounts are used by Gordan Enterprises.
Accounts Payable—
Custom Craft Inc.
Accounts Payable—
Sorenson Ltd.
Accounts Receivable—
Beisler Inc.
Accounts Receivable—
Hanover Company
Cash in Bank
Fees Income
Income Summary
Miscellaneous Expense
Office Equipment
Gail Gordan, Capital
Gail Gordan, Withdrawals
Supplies
Utilities Expense
1. Rearrange the accounts in the order in which they would be listed in the chart of accounts
for Gordan Enterprises.
2. Assign each account an account number.
Gordan Enterprises
Chart of Accounts
Assets
(100–199)
Liabilities
(200–299)
Owner’s Equity
(300–399)
Revenue
(400–499)
Expenses
(500–599)
Demonstration
Chapter Outline
Problems
Notes ■ 25
Name
Date
Class
Demonstration Problems cont.
PROBLEM 4–2 Analyzing a Cash Purchase
On July 12, ABC Computers issued Check 602 for \$4,700 for office equipment.
1. Which accounts are affected?
2. What is the classification of each account?
is a(n)
account.
is a(n)
account.
3. Is each account increased or decreased?
is
.
is
.
4. Which account is debited, and for what amount?
is debited for \$
.
5. Which account is credited, and for what amount?
is credited for \$
.
6. What is the complete entry in T-account form?
26 ■ Demonstration
Math Review forProblems
Accounting
Name
Date
Class
Demonstration Problems cont.
PROBLEM 4–3 Analyzing a Credit Purchase
On August 10, ABC Computers bought office supplies on account from Top Drawer Supplies
for \$400.
1. Which accounts are affected?
2. What is the classification of each account?
is a(n)
account.
is a(n)
account.
3. Is each account increased or decreased?
is
.
is
.
4. Which account is debited, and for what amount?
is debited for \$
.
5. Which account is credited, and for what amount?
is credited for \$
.
6. What is the complete entry in T-account form?
Math
Demonstration
Review for
Lesson
Accounting
Problems
Footer
Plans ■ 27
Name
Date
CHAPTER 4
Class
Concept Assessment
Transactions That Affect Assets, Liabilities,
and Owner’s Capital
PART A
Accounting Vocabulary
Total
Points
Student’s
Score
81
(6 points)
Directions: Using terms from the following list, complete the sentences below. Write the letter of the
term you have chosen in the space provided.
A. normal balance
B. credit
E
C. debit
D. double-entry accounting
E. T account
F. ledger
G. chart of accounts
0.
1.
2.
3.
4.
A
is a tool used by accountants to analyze business transactions.
The
of an account is the same side used to increase the account.
The left side of the T account is the
side.
The
side is the right side of the T account.
is the financial recordkeeping system in which each business transaction
affects at least two accounts.
5. A
is a list of all the accounts a business uses.
6. Accounts are grouped together in a
.
Part B
The Rules of Debit and Credit
(15 points)
Directions: Read each of the following statements to determine whether the statement is true or false.
T
T
F
F
T
F
T
F
T
F
T
T
F
F
T
T
F
F
T
T
T
F
F
F
T
F
T
F
0. Each account has a specific side that is its normal balance side.
1. Every business transaction affects at least two accounts that are on different
sides of the basic accounting equation.
2. For every debit entry made in one account, a credit entry must be made in
another account.
3. The T account is an inefficient method for analyzing many business
transactions.
4. Double-entry accounting is the recordkeeping system in which each business
transaction affects at least one account.
5. “Debit” means to increase an account balance.
6. The normal balance side of an account is the same side that is used to record
increases to the account.
7. Liability and capital accounts are increased on the debit side.
8. Debits and credits are used to record increases and decreases in each account
9. Asset accounts are increased on the credit side.
10. A credit is an amount entered on the right side of the T account.
11. If the accounting equation is not in balance after a transaction has been
recorded, one reason may be that the debit or credit part of the transaction was
not recorded.
are affected.
13. The normal balance side of an owner’s capital account is the debit side.
Concept Assessment ■ 1
Name
Date
Class
Concept Assessment cont.
PART C Analyzing Asset, Liability, and Capital Accounts
(20 points)
Directions: For each T account below, indicate the debit and credit sides, the increase and decrease
sides, and the normal balance side. The first account has been completed as an example.
Store Equipment
Debit
Increase
Balance
Accounts Payable
Cash in Bank
Credit
Decrease
Accounts Receivable
Abe Dunn, Capital
(40 points)
Directions: Analyze the following transactions by answering the questions in the table below. Use
the account names that follow. The first transaction has been completed as an example.
Cash in Bank
Accounts Receivable
Office Equipment
Office Supplies
Accounts Payable
The business bought office supplies from Central Supply for \$850 cash.
The business sold a used laser printer on account for \$1,500.
The business purchased word processing equipment for \$9,500 on account from Northern
Office Equipment Company.
4. The business paid \$3,500 on account to Northern Office Equipment Company.
5. Ms. Adams transferred an office file cabinet of her own valued at \$375 to the business.
Trans.
No
Which acounts
are affected?
What is the
classification
of each account?
Is each account
increased or
decreased?
0
Office Supplies
Asset
Increased
Cash in Bank
Asset
Decreased
1
2
3
4
5
2 ■ Concept
Quick Quiz
Assessment
Which account is Which account is
debited and for
credited and for
what amount?
what amount?
\$
850
\$
850
0.
1.
2.
3.
Name
Date
CHAPTER 4
Class
Quick Quiz
Transactions That Affect Assets, Liabilities, and Owner’s Capital
PART A
True or False
Directions: Read each of the following statements to determine whether the statement is true or false.
T
F
1. The normal balance side for an asset account is the
debit side.
T
F
2. “Debit” means the increase side of an account.
T
F
3. A credit to a liability account decreases the account balance.
T
F
4. Assets are increased on the debit side.
T
F
5. Capital is increased on the credit side.
T
F
6. Liabilities are decreased on the credit side.
T
F
7. The basic accounting equation may be expressed as
A L OE
T
F
8. The right side of a T account is always the debit side.
T
F
9. For every debit there must be an equal credit.
T
F
10. A debit to one asset account and a credit to another asset
account will result in the basic accounting equation being
out of balance.
T
F
11. The left side of a T account is always the credit side.
T
F
12. Credit means to decrease a liability.
Quick Quiz ■ 3
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Date
Class
Quick Quiz cont.
PART B
Identify the Normal Balance
Directions: For each T account below, indicate with an (N) the normal balance side.
Computer Equipment
Debit
(N)
Credit
Accounts Payable
Debit
Credit
Accounts Receivable
Abe Dunn, Capital
Debit
Debit
Credit
Credit
Cash in Bank
Debit
Credit
Office Equipment
Debit
Credit
PART C Complete the T Account
Directions: Analyze the transactions below and enter them in the T accounts provided.
2. Bought office equipment for cash, \$1,000.
3. Bought a computer on account, \$3,000.
Office Equipment
Accounts Payable
4 ■ Quick
Chapter
Quiz
Quiz
Computer Equipment
Cash in Bank
Name
CHAPTER 4
Date
Class
Chapter Quiz
Transactions That Affect Assets, Liabilities, and Owner’s Capital
Directions: Complete the following questions with a short answer.
1. What is an account?
2. Describe the purpose of a ledger in an accounting system.
3. Explain double-entry accounting.
4. What is a debit?
5. What is a credit?
6. How does a debit affect an asset account?
7. How does a credit affect the owner’s capital account?
8. What is a normal balance?
9. Why must the accounting equation remain in balance after each transaction?
10. How would you decrease a liability account?
Chapter Quiz ■ 5
Name
CHAPTER 4
Date
Class
Math Review for Accounting
Using Tax Tables
This tax table can be used to compute yearly
federal tax for filers earning between \$20,000
and \$21,000.
• Earl Jones is the head of a household
and earned \$20,553.
• \$20,553 is between \$20,550 and \$20,600.
• Earl Jones’ federal income tax is \$3,086.
Find the tax for each income and
filing status.
1. Sara Stein; \$20,017; married filing
separately
2. Roberto Gonzales; \$20,956; single
3. Li Goh; \$20,834; head of household
Solve.
5. Which filing statuses pay the same tax for incomes between \$20,000 and \$21,000?
6. Which filing status pays the most income tax for income between \$20,000 and \$21,000?
7. Both Kathy Anderson and Max Gruen earn \$20,947. Kathy is head of a household; Max is
married and filing separately. Who pays more tax? How much more?
8. Both Ed Antico and Sally Byrne are single. Ed earns \$20,557 and Sally earns \$20,594. Who
pays more tax? How much more?
28 ■ Math Review for Accounting