Chapter 4 T-Account-An accounting device used to analyze transactions. Debit-An amount recorded on the left side of a T-Account. Credit-An amount recorded on the right side of a T-Account. Chart of Accounts-A list of accounts used by a business. Contra Account-An account that reduces a Notes for 4 The values of all things owned(assets) are on the left side of the accounting equation. The values of all equities or claims against the assets(liabilities and owner’s equity) are on the right side of the accounting equation. Assets= Liabilities+Owner’s Equity must always be in balance or there is an error. Balance Side of Accounts Assets have a normal balance side on the left side of a t-account You increase an account on the balance side. You decrease an account on the side opposite the balance side. Liabilities and the Owner’s Capital Account have a balance side on the right side of a taccount. These accounts increase on the credit side and decrease on the debit side Two Basic Accounting Rules Account balances increase on the normal balance side of an account. Assets balance side is left Account balances decrease on the side opposite the normal balance side. Liabilities, Owners Capital balance side is right. Father of Accounting Fra Luca Pacioli, an Italian mathematician. The first person to explain an accounting system in writing. His book was called “The Method of Venice” which describes the double-entry accounting system. Published in 1494. The Four Steps to Analyzing a Transaction What accounts are affected? How is each account classified? How is each account balance changed? How is each amount entered?