Chapter 2 Analyzing Transactions into Debit and Credit Parts

2.1Using T Accounts

Analyzing the Accounting Equation

Assets = Liabilities + OE

Left Side Right SideAll things Claims against assetsowned

• Transactions change balances of accounts in the equation

• T account- An accounting device used to analyze transactions

• Debit-Amount recorded on the left side• Credit- Amount recorded on the right side

Increases, Decreases, and Balances in Accounts T-Account Left Side Right Side Debit Side Credit Side

• The increase side rules• 1. Assets on the left (debit), increase side on left• 2. Liabilities and OE on right (credit), increase on right

• Normal Balance-Side of the account that is increased• Assets normal debit balances • Liabilities and OE normal credit balances

• Accounts decrease on the side opposite their increase• Assets decrease on credit• Liabilities and OE decrease on debit

2.2Analyzing How Transactions Affect Accounts

• Chart of Accounts- List of accounts used by a business

• Each transactions affects at least 2 accounts

• Questions for analyzing a transaction• Which accounts are affect?• How is each account classified?• How is each classification changed?• How is each amount entered in the accounts?

• Accounts Payable-Amounts to be paid in the future for goods or services

2.3 Analyzing How Transactions Affect Owner’s Equity Accounts

• Accounts Receivable-Amounts to be received in the future due to the sale of goods or services