Using T-Accounts to Help Analyze Transactions

What you already (should) know! Basic Accounting Equation Assets = Liabilities + Owner’s Equity Assets Anything of value owned by a business. Liability Anything owed by a business Owner’s Equity The rights the owner has to the things owned by the business.

What you are going to learn T-Accounts A simple tool used to aid in the analysis of business transactions. T-Accounts are an extension of the basic accounting equation Much more orderly way of keeping track of stuff.

Account Title Debit Credit

Basic Accounting Equation as a HUGE T-Account Debit Credit ASSETS LIABILITIES OWNER’S EQUITY

So What? Anything classified as an asset increases on the debit (left) side. Anything classified as a liability or owner’s equity increases on the credit (right) side. The side that increases any account in called the normal balance side. The words debit and credit only mean left and right, nothing more or less!

For every action… Every business transaction must have at least one debit and one credit.

How Do We Classify Memorization at first It will eventually become intuitive

Suggestions for Learning How to Analyze and Classify Transactions Take good notes of examples There are only a few basic types of transactions Review examples, looking for similarities A great deal of prayer… 

Good Examples Pg 45 Pg 46 Pg 47 Pg 48 Pg 49 Pg 51 Pg 52 Pg 53 Pg 54 T-Account Practice Sheet (later)