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Accounting Ch . 3 -- Analyzing Transactions

Accounting Ch . 3 -- Analyzing Transactions. Mr. Belolan. Objectives. Analyze transactions affecting assets, liabilities and owner ’ s equity. List and apply the rules of debit and credit for asset, liability, and owner ’ s equity accounts

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Accounting Ch . 3 -- Analyzing Transactions

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  1. AccountingCh. 3 -- Analyzing Transactions Mr. Belolan

  2. Objectives • Analyze transactions affecting assets, liabilities and owner’s equity. • List and apply the rules of debit and credit for asset, liability, and owner’s equity accounts • Analyze business transactions into its debit and credit parts • Determine the balances of the accounts affected by a business transaction

  3. Introduction • Question: What is the meaning of double entry accounting? • Double Entry Accounting: • Each transaction affects at least two accounts.

  4. New Tool -- The “T” Account • “T” account • Shows the increase/decrease in a specific account • Debit and Credit – LEFT and RIGHT • Used to record increases and decreases in each account

  5. Permanent Accounts • Continuous from one accounting period to the next • Balances are carried forward

  6. Permanent Accounts Con’t • Tells us how much is on hand, or what is currently owed • Example: Cash constantly changes and we need to know our balance at all times • Examples: Assets, Liabilities, Owner’s Capital Account

  7. Temporary Accounts • Start each new accounting period with zero balances • Balances are not carried forward • Division of the Capital Account

  8. Temporary Accounts Con’t • Allows owner to tell whether revenue, expenses, and withdrawals are increasing or decreasing • Allows us to concentrate on problem areas • Examples: Expenses, Revenue, Withdrawals

  9. Rules for Assets • Increase on debit side (left) • Decrease on credit side (right) • Normal balance is a debit (left) • Used for ALL assets • Example: cards and overhead

  10. Rules for Liabilities and Owner’s Equity • Increased on credit side (right) • Decreased on debit side (lest) • Normal balance is a credit (right) • Used for ALL Liab. And O.E. • Example: card and overhead

  11. Index Cards!!! • Video summarizing debit and credit • Overhead Examples

  12. More Cards!!! Yes! • New Cards!!!!!! • Revenue • Expenses • Withdrawals

  13. REVENUE (Income) Debit Credit --- + Balance Revenue Card

  14. EXPENSES Debit Credit + --- Balance Expense Card

  15. WITHDRAWALS Debit Credit + --- Balance Withdrawals Card

  16. Review • Name two examples of temporary accounts. • Name two examples of permanent accounts. • Which two temporary accounts decrease Owner’s Equity? • Which temporary account increase Owner’s Equity?

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