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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 on theme: "2 - 1 Debits and Credits – Analyzing and Recording Business Transactions Assets = Liabilities + Owner’s Equity Owner’s Equity = Capital – Withdrawals +"— Presentation transcript:

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

2 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.

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

4 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

5 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

6 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

7 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.

8 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.

9 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.

10 2 - 10 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.

11 2 - 11 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.

12 2 - 12 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.

13 2 - 13 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.

14 2 - 14 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.

15 2 - 15 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.

16 2 - 16 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.

17 2 - 17 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.

18 2 - 18 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.

19 2 - 19 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.

20 2 - 20 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.

21 2 - 21 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.

22 2 - 22 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.

23 2 - 23 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.

24 2 - 24 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.

25 2 - 25 Assets = Liabilities + Owner’s Equity Owner’s Equity = Capital – Withdrawals + Revenue - Expenses Solve for the missing part of the equation – Review Problem 5-8


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