1. That sounds a little confusing.
Business Accounts
An account is a location within an accounting system in which the increases and decreases in a specific asset, liability, or owner’s equity are recorded and stored.
That sounds a little confusing.
All the accounts of a business are grouped together in a ledger.
A ledger is a book or a file containing a separate page for each business account. The ledger serves as a permanent record of financial transactions.

2. We should probably make this look a little more official.
Chart of Accounts
To keep track of its accounts, a business develops a Chart of Accounts.
Let’s take another look at the list of accounts for Roadrunner Delivery Service
Assets = Liabilities Owner’s Equity
Cash in Bank
Accounts Receivable
Computer Equipment
Office Equipment
Delivery Equipment
Accounts Payable
M. Sanchez, Capital
We should probably make this look a little more official.

3. Numbering the Chart of Accounts
All Asset accounts begin with 1.
Let’s see what the Roadrunner Delivery Service Accounts would look like.
All Liability accounts begin with 2.
All Owner’s Equity accounts begin with 3.
All Revenue accounts begin with 4.
All Expense accounts begin with 5.

4. Roadrunner Delivery Service Chart of Accounts
Owner’s Equity
Assets
M. Sanchez, Capital
M. Sanchez, Withdrawals
Income Summary
101
105
110
115
120
125
Cash in Bank
Accounts Receivable – City News
Accounts Receivable – Green Company
Computer Equipment
Office Equipment
Delivery Equipment
301
302
303
Revenue
401
Delivery Revenue
Liabilities
Expenses
501
505
510
515
Advertising Expense
Maintenance Expense
Rent Expense
Utilities Expense
201
205
Accounts Payable – Beacon Advertising
Accounts Payable – North Shore Auto

5. Terms You Need to Know Double-Entry Accounting
A system of recordkeeping in which each business transaction affects at least two accounts.
T Account
Shows the dollar increase or decrease in an account that is caused by a transaction. It is called a T Account because it is shaped like a T.

6. Debit and Credit Debit Credit
An amount entered on the left side of the T account.
An amount entered on the right side of the T account.
Let’s take a look at a T account.
Credit means right
side
Debit means left
side
Account Name
Left Side
Right Side
Debit Side
Credit Side

7. Rules for Asset Accounts
An asset account is increased on the debit side.
An asset account is decreased on the credit side.
The normal balance for an asset account is the debit side.
Increase on the left
side
Decrease on the right
side
Asset Account
Debit Side
Credit Side + -
Normal balance on the debit
side
Normal
Balance

8. Rules for Liability Accounts
A liability account is increased on the credit side.
A liability account is decreased on the debit side.
The normal balance for a liability account is the credit side.
Decrease on the left
side
Increase on the right
side
Liability Account
Debit Side
Credit Side - +
Normal balance on the credit
side
Normal
Balance

9. Rules for Owner’s Equity Accounts
An owner’s equity account is increased on the credit side.
An owner’s equity account is decreased on the debit side.
The normal balance for an owner’s equity account is the credit side.
Decrease on the left
side
Increase on the right
side
Owner’s Equity Account
Debit Side
Credit Side - +
Normal balance on the credit
side
Normal
Balance

10. Summary of Rules for Debits and Credits= +
Asset Account
Liability Account
Owner’s Equity Account
Debit Side
Credit Side
Debit Side
Credit Side
Debit Side
Credit Side + - - + - +
Normal
Balance
Normal
Balance
Normal
Balance
Let’s review the basic accounting equation.
Hey, the accounts on the left side of the equation are increased on the left side, and the accounts on the right side of the equation are increased on the right side.
The normal balance side is the increase side

11. Debits and Credits for Business Transactions
That’s very important. Don’t forget it!
Before we can apply the rules of debits and credits to business transactions, there is one very important rule that needs to be pointed out.
Balance Daniel Son…
Balance.
For every debit there must be a credit of equal value.

12. Homework
Textbook Page: 77
Workbook Page: 34
Problem 4-1

13. Investments by the Owner
Business Transaction 1
Maria Sanchez took $25,000 from her personal savings and deposited that amount to open a business account in the name of Roadrunner Delivery Service.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Cash in Bank and M. Sanchez, Capital
Cash in Bank is an asset account and M. Sanchez, Capital is an owner’s equity account
Cash in Bank is increased by $25,000 and M. Sanchez, Capital is increased by $25,000
Asset accounts are increased on the debit side and owner’s equity accounts are increased on the credit side
Debits equal credits
Cash in Bank
M. Sanchez, Capital + - - + =
25,000
Debit
25,000
Credit
25,000
25,000

14. Additional Investments by the Owner
Business Transaction 2
The owner, Maria Sanchez, took two telephones valued at $200 each (total $400) from her home and transferred them to the business as Office Equipment.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Office Equipment and M. Sanchez, Capital
Office Equipment is an asset account and M. Sanchez, Capital is an owner’s equity account
Office Equipment is increased by $400 and M. Sanchez, Capital is increased by $400
Asset accounts are increased on the debit side and owner’s equity accounts are increased on the credit side
Debits equal credits
Office Equipment
M. Sanchez, Capital + - - + =
400
Debit
400
Credit
400
400

15. Cash Payment Transactions
Business Transaction 3
Roadrunner issued a $3,000 check to purchase a computer system.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Computer Equipment and Cash in Bank
Computer Equipment is an asset account and Cash in Bank is an asset account
Computer Equipment is increased by $3,000 and Cash in Bank is decreased by $3,000
Asset accounts are increased on the debit side and asset accounts are decreased on the credit side
Debits equal credits
Office Equipment
Cash in Bank + - + - =
3,000
Debit
3,000
Credit
3,000
3,000

16. Buying on Credit Transactions
Business Transaction 4
Roadrunner bought a used truck on account from North Shore Auto for $12,000.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Delivery Equipment and Accounts Payable
Delivery Equipment is an asset account and Accounts Payable is a liability account
Delivery Equipment is increased by $12,000 and Accounts Payable is increased by $12,000
Asset accounts are increased on the debit side and liability accounts are increased on the credit side
Debits equal credits
Delivery Equipment
Acct Pay – North Shore Auto + - - + =
12,000
Debit
12,000
Credit
12,000
12,000

17. Selling on Credit Transactions
Business Transaction 5
Roadrunner sold one telephone to Green Company for $200 on account.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Accounts Receivable and Office Equipment
Accounts Receivable is an asset account and Office Equipment is an asset account
Accounts Receivable is increased by $200 and Office Equipment is decreased by $200
Asset accounts are increased on the debit side and asset accounts are decreased on the credit side
Debits equal credits
Acct Rec – Green Co
Office Equipment + - + - =
200
Debit
200
Credit
200
200

18. Credit Payment Transactions
Business Transaction 6
Roadrunner issued a check for $350 in partial payment of the amount owed to its creditor, North Shore Auto.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Cash in Bank and Accounts Payable
Cash in Bank is an asset account and Accounts Payable is a liability account
Cash in Bank is decreased by $350 and Accounts Payable is decreased by $350
Asset accounts are decreased on the credit side and liability accounts are decreased on the debit side
Debits equal credits
Cash in Bank
Acct Pay – North Shore Auto + - + - =
350
Credit
350
Debit
350
350

19. Credit Receivable Transactions
Business Transaction 7
Roadrunner received and deposited a check for $200 from Green Company. The check received was full payment for the telephone sold on account in transaction 5.
1) Identify
2) Classify
3) Increase
or Decrease
4) Debit and
Credit Rule
5) Do Debits
Equal Credits
Accounts affected are Cash in Bank and Accounts Receivable
Cash in Bank is an asset account and Accounts Receivable is an asset account
Cash in Bank is increased by $200 and Accounts Receivable is decreased by $200
Asset accounts are increased on the debit side and asset accounts are decreased on the credit side
Debits equal credits
Acct Rec – Green Co
Cash in Bank + - + - =
200
Debit
200
Credit
200
200

20. Summary of Debit and Credit Transactions
(1) 25,000
3, (3)
(2)
(5)
(6)
12, (4)
(7)
(6)
Bal
200
11,650
Bal
Bal
21,850
(4) 12,000
25, (1)
(2)
Bal
12,000
(5)
(7)
25,400
Bal
Bal
------
Total Debits
Total Credits =
37,050
37,050
(3) 3,000
Assets
Liabilities
Owner’s Equity = +
Bal
3,000
37,050
11,650
25,400

21. Homework
Textbook Page: 91 & 92
Workbook Page: 37
Problem 4-6

22. Problem 4 - 1 That was easy Asset Debit Credit Debit Asset Debit
Liability
Credit
Debit
Credit
Asset
Debit
Credit
Debit
Owner’s
Equity
Credit
Debit
Credit
That was easy

23. Problem 4-5 = = + (1) 45,000 85 (3) (3) 85 (5) 3,000 8,500 (2) (8) 100
(1) 45,000
(3)
(3)
(5) ,000
8, (2)
(8)
3, (5)
Bal 85
5,500
Bal
1, (7)
Bal
40,515
(2) ,500
45, (1)
(4)
Bal
8,500
(6)
(8)
45,200
Bal
Bal
100
Total Debits
Total Credits =
50,700
50,700
(4)
(6)
Assets
Liabilities
Owner’s Equity
(7) 1,500 = +
50,700
5,500
45,200
Bal
1,500

24. Homework
Textbook Page: 89 & 90
Workbook Page: 35
Problem 4-4