Analyzing Transactions into Debit and Credit Parts

Assets = Liabilities + Owner’s Equity Left sideRight Side

T Account______________ Left SideRight Side DEBIT SIDECREDIT SIDE T Account – an accounting device used to analyze transactions. Debit – an amount recorded on the left side. Credit – an amount recorded on the right side.

Assets = Liabilities + Owner’s Equity Any AssetAny Liability DebitCreditDebitCreditNORMAL BALANCE Owner’s Capital Account DebitCredit NORMAL BALANCE Normal Balance – the side of the account which is increased.

Chart of Accounts – a list of accounts used by a business.

Business Entity A business’s financial information is recorded and reported separately from the owner’s personal financial information.

Assets = Liabilities + Owner’s Equity Assets – anything of value that is owned. Equity – financial rights to the assets Liabilities – amount owed Owner’s Equity = Assets - Liabilities

OR

Transaction – a business activity which changes assets, liabilities or owner’s equity. Account – a record summarizing all info pertaining to a single item in the accounting equation. Account Title – name assigned to an account. Account Balance – the amount in an account. Account Account Title Account Balance

Unit of Measurement Business transactions are stated in numbers that have common values.

Capital – the account used to summarize the owner’s equity. Owner’s Equity = Assets - Liabilities

OR

Revenue – an increase in owner’s equity. Sale on Account – cash will be received at a later date.

Realization of Revenue Revenue is recorded at the time goods and services are sold.

Expense – a decrease in owner’s equity.

Withdrawal – assets taken out of a business for the owner’s personal use.