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Debits versus Credits By Michael Reimer. Left Side is the debit side Right side is the credit side.

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Presentation on theme: "Debits versus Credits By Michael Reimer. Left Side is the debit side Right side is the credit side."— Presentation transcript:

1 Debits versus Credits By Michael Reimer

2 Left Side is the debit side Right side is the credit side

3 This is where all the daily transactions of a business are recorded.

4 The general journal entries are posted here. The account balances are updated each day.

5 Assets = Liabilities + Owner’s Equity

6 Left side of the balance sheet equation Normal asset balance is a debit

7 Assets go up with a debit Assets go down with a credit Assets Debit Credit

8 Properties or economic resources Provision of future company benefits

9 Cash Receivables Supplies Machinery Land Inventory held for sale

10 Right side of the balance sheet equation Normal liability balance is a credit

11 Liabilities go up with a credit Liabilities go down with a debit Liabilities Debit Credit

12 Debts or payables owed by the business A reduction of future assets of the business

13 Accounts Payable Notes Payable Bank Loan Payable Mortgage Payable

14 Two Accounts: Capital: records the owner’s investment in the business Withdrawals: records the owner’s personal drawings from the business

15 Capital goes up with a credit Capital goes down with a debit M. Reimer, Capital Debit Credit

16 Withdrawals goes up with a debit Withdrawals goes down with a credit M. Reimer, Withdrawals Debit Credit

17 Is linked with another account Has an opposite balance to its counterpart Reduces the value of its counterpart

18 Revenues – Expenses = Profit or Loss

19 Revenues go up with a credit Revenues go down with a debit Revenue Debit Credit

20 Two different types: Service based: Work provided to customers (Chapters 3 to 5) Retail based: Sales of inventory to customers (Chapter 6)

21 Sales Commissions Earned Professional Fees Earned Rent Revenue Interest Earned

22 Expenses go up with a debit Expenses go down with a credit Expenses Debits Credits

23 Incur costs while doing daily business Show a consumption of assets to generate revenues

24 Advertising Expense Supplies Expense Telephone Expense Utilities Expense Wages Expense Rent Expense Insurance Expense

25 Left side is the debit side Right side is the credit side

26 Assets Withdrawals Expenses

27 Liabilities Capital Revenues


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