Chapter 3Analyzing Transactions into

Debit and Credit Parts

Assets = Liabilities + Owners Equity

T- Account

Each account receives a T-Account so that we may analyze the balance of the account

Analyzing the T-Account

Left Side Right Side

Debit Credit

Each account will have its own T-accountCash,Supplies,Pre-paid Insurance

Assets = Liabilities + Owners Equity

Left Side Right SideDebit Credit

Normal Bal...

CashSuppliesPrepaid Insurance

+ -

Left Side Right Side

Debit Credit

Normal Bal...

- +

Please work on work together and “ON your own on page 44)

All companies have a sheet of paper that tell you what all of their accounts are it is called

– Chart of Accounts Assets

• Cash

• Supplies

• Prepaid Insurance

• Accounts Receivable

Liabilities• Accounts Payable

Owners Equity• Barbara Trevino, Capital

4 questions you need to ask….

What two accounts does it effect?What types of accounts are they?How is each account balanced changed?How is each amount entered into the T-

Accounts?

1. Received cash from owner as an investment $10,000

What two accounts does it effect?

Cash Barbara Trevino, Capital

What types of accounts are they? Asset

How is each account balanced changed?

Cash Increased Barbara Trevino, Capital

increase

How is each amount entered into the T- Accounts

Owners Equity

4 questions you need to ask….

What two accounts does it effect?What types of accounts are they?How is each account balanced changed?How is each amount entered into the T-

Accounts?

How is each amount entered into the T- Accounts

Cash Barbara Trevino, Capital

Debit Credit Debit Credit

Normal Bal... Normal Bal...

+ - - +

Received Cash from Owner10,000

10,000 10,000

So we say for this transaction we Debit Cash, Credit Capital

Two major rules we must remember……... Accounting Equation - Do our assets = our

liabilities + our owners Equity???? Do our debits = our credits???

1. Paid cash for supplies $1,577

What two accounts does it effect?

Cash Supplies

What types of accounts are they? Asset

How is each account balanced changed?

Cash Decreases Supplies increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash SuppliesDebit Credit Debit Credit

Normal Bal... Normal Bal....

+ - + -

Paid Cash for supplies 1,577

1,577 1,577

So we say for this transaction we Credit cash, Debit Supplies

1. Paid cash for Insurance

What two accounts does it effect?

Cash Prepaid Insurance

What types of accounts are they? Asset

How is each account balanced changed?

Cash DecreasesPrepaid Insurance

increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash Prepaid InsuranceDebit Credit Debit Credit

Normal Bal.. Normal Bal..

+ - + -

Paid Cash for Insurance

1200 1200

So we say for this transaction we Credit cash, Debit PPI

Bought supplies on account from Butler Cleaning Supplies2,720

What two accounts does it effect?

Supplies Butler Cleaning Supplies

What types of accounts are they? AssetLiability

How is each account balanced changed?

Supplies IncreaseButler Cleaning Supplies

increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Supplies Butler Cleaning SuppliesDebit Credit Debit Credit

Normal Bal.. Normal Bal..

+ - - +

Bought supplies on account

2,270 2,270

So we say for this transaction we Debit supplies, Credit Butler Cleaning Sup

Paid cash on account to Butler Cleaning Supplies 1,360

What two accounts does it effect?

Cash Butler Cleaning Supplies

What types of accounts are they? AssetLiability

How is each account balanced changed?

Cash Decreases Butler Cleaning Supplydecreases

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash Butler Cleaning SupplyDebit Credit Debit Credit

Normal Bal.. Normal Bal..

+ - - +

Paid Cash on Account

1360 1360

So we say for this transaction we Credit cash, Debit Butler cleaning supplies

Please work on “Work together and On Your own” on page 50

Assets = Liabilities + Owners Equity

Left Side Right SideDebit Credit

Normal Bal..

CashSuppliesPrepaid Insurance

+ -

Left Side Right Side

Debit Credit Normal Bal..

- +

Owners Equity

Left Side Right Side

Debit Credit Normal Bal..

- +

Revenue

Left Side Right Side

Debit Credit Normal Bal..

+ -

Expense

Received Cash from Sales $525

What two accounts does it effect?

Cash Sales

What types of accounts are they? AssetRevenue

How is each account balanced changed?

Cash Increases Sales Increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash SalesDebit Credit Debit Credit

Normal Bal.. Normal Bal..

+ - - +

Received Cash from Sales

525 525

So we say for this transaction we Debit Cash, Credit Sales

Paid Cash for Rent 250

What two accounts does it effect?

Cash Rent Expense

What types of accounts are they? AssetExpense

How is each account balanced changed?

Cash Decreases Rent Expense

Increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash Rent ExpenseDebit Credit Debit Credit

Normal Bal.. Normal Bal..

+ - + -

Paid cash for rent $250

250 250

So we say for this transaction we Credit Cash, Debit Rent Exp.

Paid cash to owner for personal use $100

What two accounts does it effect?

Cash Ben Furman, Drawing

What types of accounts are they? AssetDrawing

How is each account balanced changed?

Cash DecreaseBen Furman, Drawing

Increase

How is each amount entered into the T- Accounts

How is each amount entered into the T- Accounts

Cash Ben Furman, DrawingDebit Credit Debit Credit

Normal Bal Normal Bal

+ - + -

Paid cash to owner for personal Use $100

100 100

So we say for this transaction we Credit Cash, Debit Drawing

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