1. Analyzing Transactions into Debit & Credit Parts

2. UNIT STANDARDS
C. Analyze business transactions using T-accounts to determine their impact on a business.
D – Identify, describe, evaluate and synthesize the essential ideas in the text.
1.1.11F – Identify and apply key terms.
A – Develop and use computation concepts, operations, and procedures with real numbers.

3. LEARNING OBJECTIVES
List and apply the rules of debit and credit for asset, liability, and stockholder’s equity accounts.
Use T accounts to analyze a business transaction into its debit and credit parts.
Analyze transactions into debit & credit parts

4. New Accounting Terms: T-account Debit Credit Normal Balance
Contra account

5. The T Account Def. - Used to show increase or decrease in an account.
A helpful tool used to analyze transactions.
Left side amounts must always = right side amounts

6. The T Account
Assets = Liabilities + Stockholder’s Equity
Credit
Debit
Debit (Dr)– the amount entered on the left side of the T account.
Credit (Cr) – the amount entered on the right side of the T account.

7. The Rules of Debit & Credit
For every debit entry made in one account, a credit of an equal amount MUST be made in another account.
Normal balance – (balance side)- is the side of an account, whether debit or credit, to which increases to the account are recorded.
Liability and SE are opposite of assets because they are on the opposite side of the equation.
A = L + SE

8. Rules for Asset accounts…
Debit Credit
Normal Balance

9. Liability & Stockholder’s Equity Accounts
Liability & SE Accounts
Debit Credit
Normal balance

10. Revenue (Sales & Fees Earned)
Debit Credit Normal Balance

11. Expenses:
Expenses
Debit Credit Normal Balance

12. Dividends Dividends D C + - Normal Balance
*is opposite of Retained Earnings bc it decreases the account
Dividends
D C
+ -
Normal Balance

13. Analyzing Transactions into its Debit and Credit Parts:
Which accounts are affected?
How is each account classified?
How is each classification changed? (is it an increase or decrease?)
How is each amount entered in the accounts? (debit or credit?)

14. DEAD COIL DEBITS CREDITS
Expenses Owner’s Equity/Capital
Assets Income/Revenue
Dividends Liabilities
All expenses, assets, dividends – increase on the debit side &have a normal debit balance.
Capital, Revenue & liability increase on the credit side & have a normal credit balance.

15. Contra Accounts
Def. - Accounts that offset a normal balance of its related account “contra asset”
Ex.: Accumulated Depreciation decreases an asset account (equipment, building, etc)
Dr Cr.
Balance
Accum. Dep

16. How Much Do You Know?
What is the normal balance side of an asset account?
Liabilities increase on which side of the T?
If office equipment is bought on account, which account is credited?
Does a credit to capital increase or decrease the account?
If a liability is paid on account, which account is debited?
If an asset is purchased with cash, which account is credited?