2 - 1 Debits and Credits – Analyzing and Recording Business Transactions Assets = Liabilities + Owner’s Equity Owner’s Equity = Capital – Withdrawals +

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Presentation transcript:

2 - 1 Debits and Credits – Analyzing and Recording Business Transactions Assets = Liabilities + Owner’s Equity Owner’s Equity = Capital – Withdrawals + Revenue - Expenses

2 - 2 Debits and Credits What is the definition of debit? n The left side of any T account. n A number entered on the left side of any account is said to be debited to an account. What is the definition of credit? n The right side of any T account. n A number entered on the right side of any account is said to be credited to an account.

2 - 3 Account Name (Title) Left side/Dr. (debit) Right side/Cr. (credit) Account Name (Title) Debits and Credits

2 - 4 * Dr. (Debit) Increase side assets expenses withdrawals Account Categories Rules of Debit & Credit A normal balance of an account is the increase side.* Normal Balance

2 - 5 Rules of Debit & Credit A normal balance of an account is the increase side.* Normal Balance liabilities capital revenue *Cr. (Credit) Increase side Account Categories

2 - 6 Cash 50,000 Capital 50,000 Owner invests $50,000 cash in the business Debit Cash and credit Capital which increases one asset account and increases the capital account

2 - 7 Cash 3,600 Delivery Fees 3,600 Deposited $3,600 received for the current day’s delivery services. Debit Cash and credit Delivery Fees which increases both an asset account and a temporary revenue account.

2 - 8 Office Eqpt 1,500 Accounts Payable 1,500 Purchased $1,500 of Office Equpiment on credit Debit Office Equipment and Credit Accounts Payable which increases an asset account and increases a liability account.

2 - 9 Cash 1,100 Delivery Fees 1,100 Delivery services are performed and $1,100 cash is received. Debit Cash and credit Delivery Fees which increases both an asset account and a temporary revenue account.

Office Supplies 750 Cash 750 Bought office supplies for $750 for the office with a check. Debit Office Supplies and Credit Cash which increases one assets account and decreases another asset account.

Accts Rec 575 Delivery Fees 575 Billed a customer $575 for delivery services for $575 performed on account. Debit Accounts Receivable and credit Delivery Fees which increases both an asset account and a temporary revenue account.

Cash 400 Delivery Fees 400 Performed delivery services for a customer and received $400 cash. Debit Cash and credit Delivery Fees which increases both an asset account and a temporary revenue account.

Telephone Exp 155 Cash 155 Received a $155 telephone bill and wrote a check to pay it. Debit Telephone Expense and credit Cash which increases one temporary expense account and decreases an asset account.

Cash 125 Accts Rec 125 Received $125 from a customer for delivery services performed last month on account. Debit Cash and credit Accounts Receivable which increases one asset account and decreases another asset account.

Rent Exp 900 Cash 900 Wrote a check to pay the $900 monthly rent Debit Rent Expense and credit Cash which increases one temporary expense account and decreases an asset account.

Accts Payable 500 Cash 500 Paid an additional $500 for the office equipment previously purchased on credit. Debit Accounts Payable and Credit Cash which decreases a liability account and decreases an asset account.

Computer Eqpt 3,000 Capital 3,000 Owner invests $3,000 of his personal computer equipment into the business. Debit Computer Equpment and credit Capital which increases an asset account and increases the capital account.

Cash 1,800 Accts Rec 1,800 Received $1,800 from a customer on account. Debit Cash and credit Accounts Receivable which increases one asset account and decreases another asset account.

Withdrawals 75 Office Supplies 75 The owner withdrew $75 of office supplies from the business for personal use. Debit Withdrawals and credit Office Supplies which increases one temporary capital account and decreases an asset account.

Advertising Exp 800 Accts Payable 800 Adverting expenses are incurred for $800 to be paid later. Debit Advertising Expense and credit Accounts Payable which increases one temporary expense account and increases a liability account.

Accts Rec 2,500 Delivery Fees 2,500 Delivery services are performed on account in the amount of $2,500 Debit Accounts Receivable and credit Delivery Fees which increases both an asset account and a temporary revenue account.

Withdrawals 500 Cash 500 The owner withdrew $500 for personal use. Debit Withdrawals and credit Cash which increases one temporary capital account and decreases an asset account.

Delivery Eqpt 16,000 Accounts Payable 16,000 Purchased a delivery truck for $16,000 on account Debit Delivery Equipment and Credit Accounts Payable which increases an asset account and increases a liability account.

Accts Payable 200 Cash 200 Paid $200 on account for the office equpiment previously purchased on account. Debit Accounts Payable and Credit Cash which decreases a liability account and decreases an asset account.

Assets = Liabilities + Owner’s Equity Owner’s Equity = Capital – Withdrawals + Revenue - Expenses Solve for the missing part of the equation – Review Problem 5-8