CHAPTER THREE ASSET, LIABILITY, AND OWNER’S EQUITY ACCOUNTS.

Slides:



Advertisements
Similar presentations
THE WORKSHEET AND THE FINANCIAL STATEMENTS
Advertisements

Analyzing Transactions into Debit and Credit Parts
CHAPTER TWELVE INTRODUCTION TO MERCHANDISING BUSINESSES: PURCHASES.
CHAPTER EIGHT The General Ledger McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved
The Simple Ledger Chapter 4.1.  An account is a page specially designed to record the changes in each individual item affecting financial position 
CHAPTER THIRTEEN ACCOUNTING FOR PURCHASES McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
CHAPTER FOUR REVENUE AND EXPENSE ACCOUNTS McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
0 Glencoe Accounting Unit 2 Chapter 5 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Unit 2 The Basic Accounting Cycle Chapter 3 Business.
CHAPTER FIVE The Trial Balance McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Prepare.
CHAPTER TWO The Effect of Revenue and Expenses.
Chapter 2 Balance Sheet Accounts UNIT 3 Recording Transactions in T-Accounts Accounting 11 September 2011.
BAT4m Unit 1: Chapter 1 September Quiz on Friday September 12, 2014.
CHAPTER TWENTY THE ACCOUNTS PAYABLE LEDGER McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
CHAPTER SEVEN The General Journal McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved
CHAPTER ELEVEN INTRODUCTION TO MERCHANDISING BUSINESSES: SALES.
X © 2010 The McGraw-Hill Companies, Inc. All rights reserved.
CHAPTER ONE Principles of Accounting McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 1-3.
CHAPTER TWENTY TWO COST OF GOODS SOLD AND STATEMENTS.
CHAPTER SIXTEEN THE PURCHASES JOURNAL McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved
3–1 1-1 Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Accounting for a Service Business Unit 1.4 Balance Sheet Accounts.
Chapter 8 The Six-Column Work Sheet
Chapter 10 Completing the Accounting Cycle for a Sole Proprietorship
TRANSACTIONS THAT AFFECT ASSETS, LIABILITIES AND OWNER’S CAPITAL Chapter 4.
CHAPTER TWENTY ONE WORKSHEET ADJUSTMENTS McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
CHAPTER FIFTEEN THE SALES JOURNAL McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved
CHAPTER TWENTY THREE ADJUSTING AND CLOSING THE GENERAL LEDGER.
CHAPTER SEVENTEEN THE CASH RECEIPTS JOURNAL McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Balance Sheet, T-Accounts and the Simple Ledger  THE RECORDING PROCESS Unit 2.
CHAPTER NINETEEN THE ACCOUNTS RECEIVABLE LEDGER.
CHAPTER TWENTY FIVE PETTY CASH AND OTHER SPECIAL CASH PROCEDURES.
CHAPTER FOURTEEN ACCOUNTING FOR SALES McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved
Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1Show the relationship between the accounting equation and a T account. LO2 Identify.
Relationship of Revenue, Expenses, and Withdrawals to Owner’s Equity CHAPTER 5.
Analyzing Transactions into debit and credit parts Chapter 3.
CHAPTER EIGHTEEN THE CASH PAYMENTS JOURNAL McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
Debit & Credit Left side & Right side Accounting equation. Accounts accumulate the results of transactions. Debit are always entered on the left side.
© 2014 Cengage Learning. All Rights Reserved. Do Now: SLIDE 1 LO1 Lesson 2-1 ●What are different ways in which you can get cash? ●What would you consider.
* Debit * An entry recording an amount owed, listed on the left-hand side or column of an account. * Credit * The ability to obtain goods or services.
Analyzing Business Transactions Using T Accounts FLASHCARDS.
©The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin Chapter Four The Double-Entry Accounting System.
0 Glencoe Accounting Unit 2 Chapter 4 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 Transactions That Affect Assets, Liabilities,
Financial Accounting Fundamentals John J. Wild Fourth Edition John J. Wild Fourth Edition McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies,
Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1Show the relationship between the accounting equation and a T account. LO2 Identify.
ANALYZING TRANSACTIONS INTO DEBIT AND CREDIT PARTS CHAPTER 3.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 2-1 Using T Accounts Even though the effects of transactions can be recorded in the.
Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1Show the relationship between the accounting equation and a T account. LO2 Identify.
3–13–1 1-1 Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
GLENCOE / McGraw-Hill. Analyzing Business Transactions Using T Accounts.
Define accounting terms related to analyzing transactions into debit and credit parts Indentify accounting practices related to analyzing transactions.
0 Glencoe Accounting Unit 2 Chapter 5 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Unit 2 The Basic Accounting Cycle Chapter 3 Business.
Chapter 4 Transactions That Affect Assets, Liabilities, and Owner’s Capital What You’ll Learn Calculate the account balances after recording business transactions.
© 2014 Cengage Learning. All Rights Reserved.
Chapter 2: The Recording Process
Learning Objectives Explain T Accounts and How to Foot and Balance
What You’ll Learn Prepare a chart of accounts.
Debit & Credit Left side & Right side.
LESSON 2-1 Using T Accounts
The T Account.
Lesson 1-1 Using Accounting Principles and Records
Chapter 2 The Double Entry System for assets, liabilities and capital
© 2014 Cengage Learning. All Rights Reserved.
© 2014 Cengage Learning. All Rights Reserved.
Chapter 4, Section 2 Applying the Rules of Debit and Credit
© 2014 Cengage Learning. All Rights Reserved.
Analyzing Transactions
Analyzing Transactions
Chapter 4, Section 2 Applying the Rules of Debit and Credit
Lesson 1-1 Using Accounting Principles and Records
The Simple Ledger Debit and Credit Theory
Presentation transcript:

CHAPTER THREE ASSET, LIABILITY, AND OWNER’S EQUITY ACCOUNTS

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Set up T accounts. 2. Enter opening balances in T accounts. 3. Record debits and credits in asset, liability, and owner’s equity accounts. 4. Foot and balance the accounts. 5. Prove the fundamental accounting equation. ASSET, LIABILITY, AND OWNER’S EQUITY ACCOUNTS Objectives:

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-4 The Form of Accounts The simplest form of an account looks like the letter “T” and is therefore called a T account. The left side is the debit side. The right side is the credit side.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-5 Opening Accounts for the Balance Sheet Items For assets, the beginning balance is on the left side, or debit side. For liabilities and owner’s equity, the beginning balances are on the right hand side, or credit side.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-6 Recording Changes in Accounts For asset accounts, increases are entered on the debit side. Decreases are entered on the credit side. For liabilities and owner’s equity accounts, increases are entered on the credit side. Decreases are entered on the debit side.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-7 Finding the Balances of Accounts Each side of the account is added. The smaller balance is subtracted from the larger balance. The difference is the account balance. The account balance is recorded on the balance side in pencil. This is known as a pencil footing.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-8 Using Account Balances to Prove the Accounting Equation Once the account balances have been computed they can be used to prove the accounting equation. assets = liabilities + owner’s equity.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 3-9 Accounting Terminology Account Account Balance Debit Credit General Ledger Pencil Footing Source Document

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary A separate account is kept for every asset, liability, and owner’s equity item in a business. The accounts are used to record the increases and decreases caused by daily transactions. All accounts together are known as the general ledger.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) Two things must be considered when analyzing and recording each part of a business transaction: 1. The type of account affected (asset, liability, or owner’s equity). 2. Whether an increase or a decrease is involved.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) The left side of an account is the debit side. The right side of an account is the credit side.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) Increases in assets are recorded as debits. Decrease in assets are recorded as credits.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) Increases in liabilities and in owner’s equity are recorded as credits. Decreases in liabilities and in owner’s equity are recorded as debits.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) An account balance is the difference between the total debits and the total credits in an account. A total or balance written in small pencil figures is called a pencil footing.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) To foot or pencil-foot a column of figures means to total the figures.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved The “T” in T account stands for transaction. 2. Beginning balances for assets are on the debit side of the account. 3. Liabilities and owner’s equity accounts both have debit balances. Topic Quiz Answer the following true/false questions: TRUE FALSE

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Investigating on the Internet Sources of information about accounts and account balances can be accessed on many corporate websites. Search for a website of a business that shows a financial report and study how the report addresses their accounts.

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved (Return to Topic Quiz) 1. The “T” in T account stands for transaction. FALSE It is because an account looks like the letter “T.”

McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved (Return to Topic Quiz) 3. Liabilities and owner’s equity accounts both have debit balances. FALSE Liabilities and owner’s equity accounts have credit balances.