Chapter 3 Review
Know Concepts:
 Cash is increased with debit
 An Accounting device used to analyze transactions is a T account
 An amount recorded on the left side of the T account is a debit
 Asset accounts increase on the debit side
 When cash is paid for supplies, the supplies account is increased by a debit
 The left side of an asset account is the debit side because asset accounts are on
the left side of the accounting equation
 Increases on accounts are recorded on the normal balance side
 Prepaid insurance is decreased by a credit
 The balance of an account increases on the same side as the normal balance
side
 A list of accounts used by a business is a chart of accounts
 The normal balance side of an accounts receivable is a debit
 Each asset account has a normal debit balance
 Recording withdrawals directly in the owner’s equity account is not a common
accounting task
 Each transaction changes the balance of at least two accounts
 Advertising Expense is increased by a debit
 Each liability account has a normal credit balance
 Increases in expense accounts are recorded as debits because they decrease the
owner’s capital account
 A drawing account is decreased by a credit and increased by a debit
 Accounts payable accounts are increased by a credit
 The normal balance side of any expense account is the debit side
 When the owner invests cash in a business, the owner’s capital account is
increased by a credit
 The right side of a T account is the credit side
 Increases in a revenue account are shown on a T account’s credit side
 The normal balance side of an asset account is the debit side
 When $1,500.00 cash is received on account, Accounts Receivable is
decreased with a credit and Cash is increased with a debit
 When a business pays cash on account, a liability account is decreased by a
debit
 If an amount is recorded on the side of a T account opposite the normal
balance side, the account balance is decreased
 When cash is received from sales, the change in owner’s equity is usually
recorded in a separate revenue account
Know which accounts go to their classifications (Cash is Asset, Accts.
Rec is Asset, Sales is Owner’s Equity, Acct. Pay. is Liability, Expenses
are Owner’s Equity, Prepaid insurance and Supplies are Assets.)
Know their normal balances
Know how to do transactions between accounts