Debits and Credits: A Review In accounting, we will talk about DR (debits) and CR (credits) DR is associated with the left side of an account. CR is associated with the right side of an account. Remember this!!!!!!!!!!!!!!!

Which side is an assets opening balance on? The LEFT side… so the Debit (DR) side Which side is a liability or equity account opening balance on? The Right side…. so the Credit (CR) side!

Double Entry accounting… We have said that every place in the world uses ‘Double Entry’ accounting. This means at least two accounts are always affected. The big benefit to this system of accounting is that: Debits (DR) always equal Credits (CR)!!

Double Entry Accounting Chart

Or…

Create a chart, with a partner, showing: Assets: Beginning Balance = DR Assets: Increase = DR Assets: Decrease = CR Liabilities: Beginning Balance = CR Liabilities: Increase = CR Liabilities: Decrease = DR Owner’s Equity (Capital): Beg. Bal. = CR Owner’s Equity (Capital): Increase? / Decrease?

Numbering your transactions… Transaction 1: $200 worth of supplies are purchased for cash. Transaction 2: $200 for a brake job is put ‘on account’ with Village Auto Totalling your transactions….

Page 92, Transactions 1-6 & Account Totals

‘On Account’ The term ‘on account’ is used extensively in modern business. It refers to items that are purchased or sold ‘on credit.’ It means that the item is not paid for when bought or sold – and will result in an account receivable (A/R) or account payable (A/P)

Ex. $250 worth of supplies are purchased on account. (as opposed to ‘with cash.’) DR to supplies CR (to increase) accounts payable (as opposed to a CR to cash) ** either way… DR = CR !!

Homework Page 96, 1,2,3 (Handout) Page 107, ‘Exercise’ 1 A. (Use a T Account Ledger) Do the transactions for this ‘new’ business – what will the opening balances be for each account? Calculate account totals when complete.