Accounting
Chapter 3
Lesson 3-1
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T account is a device to analyze transactions
An amount recorded on the left side = Debit
An amount recorded on the right side = Credit
Debit and Credit do NOT mean increase and decrease
The side that increases is called the normal balance side
Assets have normal balances on the left side
Liabilities have normal balances on the right side
Owner’s Equity accounts can be either
Account balances increase on normal balance side
Account balances decrease on the side opposite the normal balance side
Lesson 3-2
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Steps to analyze for debit and credit parts
Which accounts are affected?
How is each account classified?
How is each classification changed?
How is each amount entered into the account?
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Debits must equal credits for each transaction
Total debits must equal total credits
Every transaction does NOT have to impact both sides of the accounting
equation
Lesson 3-3
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Owner’s Equity impacted by sales, expenses, withdrawals and investments
To limit number of transactions in O.E. each has own account that follows
the rules of O.E.
Sales has a credit normal balance
Expenses have a debit normal balance
Withdrawals have a debit normal balance
Rachel Nelson, Capital
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Expenses
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Sales
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Drawing
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