TRANSACTIONS THAT AFFECT ASSETS, LIABILITIES AND OWNER’S CAPITAL Chapter 4.

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Presentation transcript:

TRANSACTIONS THAT AFFECT ASSETS, LIABILITIES AND OWNER’S CAPITAL Chapter 4

Accounts and the Double Entry System  Chart of Accounts – List of all accounts used by a business  See pg 79  Ledger – A Book or System where all accounts are grouped together  General Ledger  Double Entry Accounting – A system of analyzing transactions that uses Debits and Credits

Accounts and the Double Entry System  Debits – The left side of an account  Credits – The right side of an account  T Account – A tool for using double-entry accounting  Normal Balance – The side of an account used to record increases in that account.

Rules of Debit and Credit for Assets  Asset Accounts  Increased on the debit side (left side)  Decreased on the credit side (right side)  The Normal Balance for Assets is the Debit side Debit + Increase Side Normal Balance Credit - Decrease Side Assets

Rules for Liabilities and Owner’s Equity  Liabilities and Owner’s Equity Accounts  Increased on the Credit (Right) side  Decreased on the Debit (Left) side  Normal Balance on the Credit side Debit - Decrease Side Credit + Increase Side Normal Balance Liabilities / Owner’s Equity