Please get out a sheet of notebook paper and draw this diagram

Please get out a sheet of notebook paper and draw this diagram

Chapter 2 Analyzing Transactions into Debit and Credit Parts

T- Account Assets Liabilities Owners Equity Each account receives a T-Account so that we may analyze the balance of the account

Debit credit rap Analyzing the T-Account Debit does not mean debt Debit only means the left side Debit and Credit owe their birth from 4 Latin words: Debere: Binding to Owe. Debitum: That which is due Credere: Handed over via trust alone. Creditum: A loan enacted through trust. Leftdoes Side not mean credit Credit like a Right Side credit card Debit Credit Credit simply means the right side of the t-account Each account will have its own T-account Cash,Supplies,Pre-paid Insurance

5 Rules that you have to learn. 1. Assets Increases on Debit/ Decreases on the Credit NORMAL BALANCE is always on the side 2. Owner’s Equity ( CAPITAL ACCOUNT) Increases on the Credit/ Decreases on the Debit NORMAL BALANCE is on the side Liabilities ( Accounts Payable) Increases on Credit/Decreases on Debit

Assets Left Side Debit Normal Bal. Liabilities Owners Equity Barbara Trevino, Capital Right Side Credit - Cash Supplies Prepaid Insurance Accounts Receivable Left Side Debit Right Side Credit Normal Bal. -

Please work on work together and “ON your own on page 31)

All companies have a sheet of paper that tell you what all of their accounts are it is called – Chart of Accounts Liabilities Assets Cash Supplies Prepaid Insurance Accounts Receivable Accounts Payable Owners Equity Barbara Trevino, Capital Barbara Trevino, Drawing Revenue Sales Expenses Advertising Expense Utilities Expense Rent Expense

4 questions you need to ask . What two accounts does it effect? What types of accounts are they? How is each account balanced changed? How is each amount entered into the TAccounts? RULE #2 – FOR EVERY DEBIT THERE MUST BE A CREDIT FOR SAME AMOUNT

1. Received cash from owner as an investment 10,000 What two accounts does it effect? Cash Barbara Trevino, Capital What types of accounts are they? Asset Owners Equity How is each account balanced changed? Cash Increased Barbara Trevino, Capital increase How is each amount entered into the T- Accounts

4 questions you need to ask . What two accounts does it effect? What types of accounts are they? How is each account balanced changed? How is each amount entered into the TAccounts?

How is each amount entered into the T- Accounts Received Cash from Owner 10,000 Cash Debit Normal Bal. 10,000 Barbara Trevino, Capital Credit Debit Credit Normal Bal. - - 10,000 So we say for this transaction we Debit Cash, Credit Capital

Two major rules we must remember . Accounting Equation - Do our assets our liabilities our owners Equity? Do our debits our credits?

1. Paid cash for supplies 1,577 What two accounts does it effect? Cash Supplies What types of accounts are they? Asset How is each account balanced changed? Cash Decreases Supplies increase How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Paid Cash for supplies 1,577 Cash Debit Normal Bal. Supplies Credit Debit Credit Normal Bal. 1,577 - 1,577 So we say for this transaction we Credit cash, Debit Supplies

1. Paid cash for Insurance What two accounts does it effect? Cash Prepaid Insurance What types of accounts are they? Asset How is each account balanced changed? Cash Decreases Prepaid Insurance increase How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Paid Cash for Insurance Cash Debit Normal Bal. Credit Prepaid Insurance Debit Credit Normal Bal. - 1200 1200 - So we say for this transaction we Credit cash, Debit PPI

Bought supplies on account from Butler Cleaning Supplies 2,720 What two accounts does it effect? Supplies Butler Cleaning Supplies What types of accounts are they? Asset Liability How is each account balanced changed? Supplies Increase Butler Cleaning Supplies increase How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Bought supplies on account Supplies Debit Credit Normal Bal. 2,270 - Butler Cleaning Supplies Debit Credit Normal Bal. - 2,270 So we say for this transaction we Debit supplies, Credit Butler Cleaning Sup

Paid cash on account to Butler Cleaning Supplies 1,360 What two accounts does it effect? Cash Butler Cleaning Supplies What types of accounts are they? Asset Liability How is each account balanced changed? Cash Decreases Butler Cleaning Supply decreases How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Paid Cash on Account Cash Debit Normal Bal. Credit Butler Cleaning Supply Debit Credit Normal Bal. 1360 1360 So we say for this transaction we Credit cash, Debit Butler cleaning supplies

Please work on “Work together and On Your own” on page 37

Can you T-account these transactions? Paid Cash to Mr. Prosser shirts 25.00 Mr. Parks invested 1200 into his own company Bought 200 worth of supplies on account, Mr. Lane shoes. What side do we increase on with a Liability account? What is the Normal balance of a Capital account?

Assets Liabilities Owners Equity Owners Equity Left Side Debit Normal Bal. Right Side Credit - Cash Supplies Prepaid Insurance Left Side Debit - Right Side Credit Normal Bal. Revenue Left Side Debit Right Side Credit Normal Bal. Expense and Drawing Left Side Right Side Debit Credit Normal Bal.

Received Cash from Sales 525 What two accounts does it effect? Cash Sales What types of accounts are they? Asset Revenue How is each account balanced changed? Cash Increases Sales Increase How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Received Cash from Sales Cash Debit Normal Bal. 525 Sales Credit Debit Credit Normal Bal. - - 525 So we say for this transaction we Debit Cash, Credit Sales

Paid Cash for Rent 250 What two accounts does it effect? Cash Rent Expense What types of accounts are they? Asset Expense How is each account balanced changed? Cash Decreases Increase Rent Expense How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Paid cash for rent 250 Cash Debit Normal Bal. Credit 250 Rent Expense Debit Credit Normal Bal. 250 - So we say for this transaction we Credit Cash, Debit Rent Exp.

Paid cash to owner for personal use 100 What two accounts does it effect? Cash Ben Furman, Drawing What types of accounts are they? Asset Drawing How is each account balanced changed? Cash Decrease Ben Furman, Drawing Increase How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts Paid cash to owner for personal Use 100 Cash Debit Normal Bal Credit 100 Ben Furman, Drawing Debit Credit Normal Bal 100 - So we say for this transaction we Credit Cash, Debit Drawing

1. 2. 3. 4. 5. 6. 7. 8. Sold Services on Account Mr. P Hats 100 Bought supplies with cash 20 Received Cash on Account Mr. L shoes 40 Paid cash to owner personal use 30 Bought supplies on account from Mr. C 50 Paid cash on account Mr. C 40 Sold Services for cash 50 Paid cash for rent 100

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