Debit and Credit
(Using “T” Accounts)
Chapter 2
Analyzing Transactions
into Debit and Credit
Parts
DO NOW: In your notebook

What do you know about debits and credits?
The Accounting Equation – It’s
really not efficient

http://www.youtube.com/watch?v=PEXulul11
dE
Let’s Break the Accounting
Equation Down
Assets = Liabilities + Owner’s Equity
Remember how we named OE transactions as Investment, Withdrawal, Revenue and Expense
The owner gave her own cash to the business for the business to use
We increased cash
We increased Owner’s Equity, because the owner has a right to that
money
We called it INVESTMENT
The owner took money out of the business to pay for something for herself–
not business related
We decreased cash
We decreased Owner’s Equity, because this $ wasn’t there for her to have
the right to it
We called it Withdrawal
Let’s Break the Accounting
Equation Down
Assets = Liabilities + Owner’s Equity
Remember how we named OE transactions as Investment, Withdrawal, Revenue and Expense
A sale occurs
We increased either cash or accounts receivable
We increased Owner’s Equity, because the owner has a right to
that money received or coming in
We called it REVENUE
OR
We pay cash for a service (telephone bill, repairs, rent) that isn’t an asset
We decrease cash
We decrease Owner’s Equity, because the owner is losing the rights to the cash
We called it EXPENSE
Let’s Break the Accounting
Equation Down
Assets = Liabilities + Owner’s Equity
Remember how we named OE transactions as Revenue and Expense?
Let’s practice some of these:
Paid cash for charity:
Sold services for cash:
Sold services to customer
On account:
Paid cash for cleaning
service to clean office:
Decrease cash (asset),
decrease Capital (OE)
Expense
Increase cash (asset)
Increase Capital (OE)
Revenue
Increase accounts receivable (asset),
Increase Capital (OE)
Revenue
Decrease cash (asset)
Decrese Capital (OE)
Expense
The Expanded
Accounting Equation
Assets = Liabilities + Owner’s Equity
Assets = Liabilities +
Investment – Withdrawal + Revenue - Expense
(Capital)
Accounting Terms

T account – Temporary account; an accounting
device used to analyze transactions

Debit – an amount recorded on the left side of the T
account

Credit – an amount recorded on the right side of the
T account
T Account and Debits and Credits:
The Increase-Decrease Secret

http://www.youtube.com/watch?v=DfX_mbbB
sYo
–
WITT
The Accounting Equation
Using T Accounts

Debits & Credits
http://www.youtube.com/watch?v=99LTqkxz
BpA
Learning on the closet door
REVIEW IN PRINT

Textbook pages 28, 29, and 30
Increases and Decreases for the “T”
Account


Two sides of an account are used to record
increases and decreases to that account.
Any Asset



Debit side increases (Left side and normal balance)
Credit decreases (Right side)
Any Liability and OE


Debit side decreases (left side)
Credit side increases (right side and normal balance)
Account Balances

Normal Balance
–
The side of the account that increases

Assets
–
–

On the left side of the T
Have normal debit balances
Liabilities and OE
–
On the right side of the T
– Have normal credit balances
Work Together


WP p. 21
Textbook p. 31
Work Together


WP p. 22
Textbook p. 31
USE THE
STEPS!
Debit/Credit Dance

http://www.youtube.com/watch?v=j71Kmxv7s
mk
TRANSACTION ANALYSIS

Step by step
–
–
Which accounts are affected?
How is each account classified?

–
How is each classification changes?

–
Asset, liability, or owner’s equity account
Increase or decrease
How is each amount entered in the accounts?

Debit or credit side
Received cash from owner as an
investment
$5000

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an asset
Capital is an OE
3. How is each classification changed?
–
–

Cash and Capital
Assets: increase
OE: Increase
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account cash
OE increase on the credit side

Credit the OE account capital
Paid cash for supplies

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Supplies is an Asset
Cash is an Asset
3. How is each classification changed?
–
–

Supplies and Cash
One asset (supplies): increase
One asset (cash): decrease
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account supplies
Assets decrease on the credit side

Credit the asset account cash
$275.00
Paid cash for insurance

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Prepaid insurance is an Asset
Cash is an Asset
3. How is each classification changed?
–
–

Prepaid insurance and cash
One asset (prepaid insurance): increase
One asset (cash): decrease
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account prepaid insurance
Assets decrease on the credit side

Credit the asset account cash
$1,200
Bought supplies on account

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Supplies is an Asset
Accounts Payable is a Liability
3. How is each classification changed?
–
–

Supplies and Accounts Payable (Supply Depot)
Assets: increase
Liabilities: increase
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account supplies
Liabilities increase on the credit side

Credit the liability account Accounts payable
$500
Paid cash on account

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an Asset
Accounts Payable is a Liability
3. How is each classification changed?
–
–

Cash and Accounts Payable (Supply Depot)
Assets: decrease
Liabilities: decrease
4. How is each amount entered in accounts?
–
Assets decrease on the credit side

–
Credit the asset account cash
Liabilities decrease on the debit side

debit the liability account Accounts payable
$300
Practice




Work Together
– WP p.23
– Textbook p. 27
HOMEWORK:
Study Guide 2: WP p. 17
Study Guide Part Three: WP p. 19, #’s 1 – 8
On Your Own
– WP p. 24
– Textbook p. 37`
Analyzing Trasactions: OE Accts
Receive cash from sales

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an asset
Sales is an OE (revenue)
3. How is each classification changed?
–
–

Cash and Sales
Assets: increase
OE: Increase
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account cash
OE increase on the credit side

Credit the revenue account sales
$295
Sold services on account

1. Which accounts are affected?
–

2. How is each account classified?
–
–

AR is an asset
Sales is an revenue account that affects OE
3. How is each classification changed?
–
–

Accounts receivable and Sales
Assets: increase
OE: Increase
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account AR
OE increase on the credit side

Credit the revenue account sales (OE)
$350
Paid cash for an expense

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an asset
Rent Exp is an OE
3. How is each classification changed?
–
–

Cash and Rent Expense
Assets: decrease
OE: decreases
4. How is each amount entered in accounts?
–
OE decrease on the debit side

–
Debit the rent expense account
Assets decrease on the credit side

Credit the asset account cash
(Rent) $300
Received cash on account

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an asset
AR is an asset
3. How is each classification changed?
–
–

Cash and Accounts receivable
Assets: (cash) increase
Assets: (AR) decreases
4. How is each amount entered in accounts?
–
Assets increase on the debit side

–
Debit the asset account cash
Assets decrease on the credit side

Credit the asset account AR
$200
Paid cash to owner for personal
use
$125

1. Which accounts are affected?
–

2. How is each account classified?
–
–

Cash is an asset
Owner Drawing is an OE
3. How is each classification changed?
–
–

Cash and Owner, Drawing
Assets: decrease
OE: decreases
4. How is each amount entered in accounts?
–
OE decreases on the debit side

–
Debit the OE account Owner Drawing
Assets decrease on the credit side

Credit the asset account cash
REVIEW ACTIVITIES
–
http://www.quia.com/cm/63252.html

Quia game matching transactions and vocab