Principles of Financial Accounting

Chapter 3

Accounting Equation Assets = Liabilities + SE Stockholder’s Equity is divided into:

Paid in capital Retained Earnings

Retained Earnings is dividend into: Net Earnings (revenues & expenses) Dividends

Double entry accounting An account is an individual listing

of increases and decreases to specific assets, liabilities, etc.

Debits increase assets, expenses, and the dividends account.

Credits increase liabilities, revenues, and stockholders’ equity accounts.

Accounting Cycle Journal – the book of original entry

A chronological record of transactions. Ledger – A collection of transactions to

specific accounts. Chart of accounts – a listing of all accounts

in the accounting system Trial Balance – a listing of all accounts

with a balance in the general ledger. Proves the equality of debits and credits.

Assignment P3-8A page 139 BYP3-1 page 144 BYP3-9 page 147