Accounting Ch Analyzing Transactions Mr. Belolan

Objectives  Analyze transactions affecting assets, liabilities and owner ’ s equity.  List and apply the rules of debit and credit for asset, liability, and owner ’ s equity accounts  Analyze business transactions into its debit and credit parts  Determine the balances of the accounts affected by a business transaction  Analyze transactions affecting assets, liabilities and owner ’ s equity.  List and apply the rules of debit and credit for asset, liability, and owner ’ s equity accounts  Analyze business transactions into its debit and credit parts  Determine the balances of the accounts affected by a business transaction

Introduction  Question: What is the meaning of double entry accounting?  Double Entry Accounting:  Each transaction affects at least two accounts.  Question: What is the meaning of double entry accounting?  Double Entry Accounting:  Each transaction affects at least two accounts.

New Tool -- The “T” Account  “T” account  Shows the increase/decrease in a specific account  Debit and Credit – LEFT and RIGHT  Used to record increases and decreases in each account  “T” account  Shows the increase/decrease in a specific account  Debit and Credit – LEFT and RIGHT  Used to record increases and decreases in each account

Permanent Accounts  Continuous from one accounting period to the next  Balances are carried forward  Continuous from one accounting period to the next  Balances are carried forward

Permanent Accounts Con’t  Tells us how much is on hand, or what is currently owed  Example: Cash constantly changes and we need to know our balance at all times  Examples: Assets, Liabilities, Owner ’ s Capital Account  Tells us how much is on hand, or what is currently owed  Example: Cash constantly changes and we need to know our balance at all times  Examples: Assets, Liabilities, Owner ’ s Capital Account

Temporary Accounts  Start each new accounting period with zero balances  Balances are not carried forward  Division of the Capital Account  Start each new accounting period with zero balances  Balances are not carried forward  Division of the Capital Account

Temporary Accounts Con’t  Allows owner to tell whether revenue, expenses, and withdrawals are increasing or decreasing  Allows us to concentrate on problem areas  Examples: Expenses, Revenue, Withdrawals  Allows owner to tell whether revenue, expenses, and withdrawals are increasing or decreasing  Allows us to concentrate on problem areas  Examples: Expenses, Revenue, Withdrawals

Rules for Assets  Increase on debit side (left)  Decrease on credit side (right)  Normal balance is a debit (left)  Used for ALL assets  Example: cards and overhead  Increase on debit side (left)  Decrease on credit side (right)  Normal balance is a debit (left)  Used for ALL assets  Example: cards and overhead

Rules for Liabilities and Owner’s Equity  Increased on credit side (right)  Decreased on debit side (lest)  Normal balance is a credit (right)  Used for ALL Liab. And O.E.  Example: card and overhead  Increased on credit side (right)  Decreased on debit side (lest)  Normal balance is a credit (right)  Used for ALL Liab. And O.E.  Example: card and overhead

Index Cards!!!  Video summarizing debit and credit Video summarizing debit and credit  Overhead Examples  Video summarizing debit and credit Video summarizing debit and credit  Overhead Examples

More Cards!!! Yes!  New Cards!!!!!!  Revenue  Expenses  Withdrawals  New Cards!!!!!!  Revenue  Expenses  Withdrawals

Revenue Card REVENUE (Income) DebitCredit Balance

Expense Card EXPENSES DebitCredit +--- Balance

Withdrawals Card WITHDRAWALS DebitCredit Balance

Review  Name two examples of temporary accounts.  Name two examples of permanent accounts.  Which two temporary accounts decrease Owner’s Equity?  Which temporary account increase Owner’s Equity?  Name two examples of temporary accounts.  Name two examples of permanent accounts.  Which two temporary accounts decrease Owner’s Equity?  Which temporary account increase Owner’s Equity?