Please get out a sheet of

notebook paper and draw this

diagram
 Chapter 2
Analyzing Transactions into
Debit and Credit Parts
 T- Account

Assets = Liabilities + Owners Equity

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

the balance of the account
 Debit credit rap

Analyzing the T-Account

Debit does not mean debt
Debit and Credit owe their birth from 4 Latin words:
Debere: Binding to Owe.
Debit only means the left side
Debitum: That which is due
Credere: Handed over via trust alone.
Creditum: A loan enacted through trust.

Credit
Leftdoes
Side not mean credit like a
Right Side
credit card
Debit Credit
Credit simply means the right side of
the t-account
Each account will have its own T-account
Cash,Supplies,Pre-paid Insurance
5 Rules that you have to learn..
1. Assets
• Increases on Debit/ Decreases on the Credit
• NORMAL BALANCE is always on the + side
2. Owner’s Equity ( CAPITAL ACCOUNT)
• Increases on the Credit/ Decreases on the Debit
• NORMAL BALANCE is on the + side
 Liabilities ( Accounts Payable)
• Increases on Credit/Decreases on Debit
 Assets = Liabilities + Owners Equity
Barbara Trevino, Capital

Left Side Right Side

Left Side Right Side Debit Credit
Debit Credit
Normal Bal...
Normal Bal...
+ - - +
Cash
Supplies
Prepaid Insurance
Accounts Receivable
 Please work on work together and “ON
your own on page 31)
 All companies have a sheet of paper that tell
you what all of their accounts are it is called
– Chart of Accounts
 Liabilities
 Assets • Accounts Payable
• Cash  Owners Equity
• Supplies • Barbara Trevino, Capital
• Barbara Trevino, Drawing
• Prepaid Insurance
 Revenue
• Accounts Receivable • Sales
 Expenses
• Advertising Expense
• Utilities Expense
• Rent Expense
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?

RULE #2 – FOR EVERY DEBIT THERE

MUST BE A CREDIT FOR SAME AMOUNT
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
Owners Equity
How is each account balanced changed?

Cash Increased Barbara Trevino, Capital

increase
How is each amount entered into the T- Accounts
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 Received Cash from Owner
10,000

Cash Barbara Trevino, Capital

Debit Credit Debit Credit
Normal Bal... Normal Bal...
+ - - +
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 Paid Cash for supplies 1,577
Cash Supplies
Debit Credit Debit Credit
Normal Bal... Normal Bal....
+ - + -

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?

Prepaid Insurance
Cash Decreases increase

How is each amount entered into the T- Accounts

How is each amount entered into
the T- Accounts Paid Cash for Insurance
Cash Prepaid Insurance
Debit Credit Debit Credit
Normal Bal.. Normal Bal..
+ - + -

1200 1200

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

Bought supplies on account from Butler Cleaning Supplies
2,720
What two accounts does it effect?
Supplies Butler Cleaning Supplies
What types of accounts are they? Asset
Liability
How is each account balanced changed?
Butler Cleaning Supplies
Supplies Increase increase

How is each amount entered into the T- Accounts

How is each amount entered into
the T- Accounts Bought supplies on account
Supplies Butler Cleaning Supplies
Debit Credit Debit Credit
Normal Bal.. Normal Bal..
+ - - +
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? Asset
Liability
How is each account balanced changed?

Cash Decreases Butler Cleaning Supply

decreases
How is each amount entered into the T- Accounts
How is each amount entered into
the T- Accounts Paid Cash on Account
Cash Butler Cleaning Supply
Debit Credit Debit Credit
Normal Bal.. Normal Bal..
+ - - +
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 37
Can you T-account these
transactions?
 Paid Cash to Mr. Prosser shirts $25.00
 Mr. Parks invested $1200 into his own company
 Bought $200 worth of supplies on account, Mr.
Lane shoes.
 What side do we increase on with a Liability
account?
 What is the Normal balance of a Capital account?
 Assets = Liabilities + Owners Equity
Owners Equity
Left Side Right Side
Left Side Right Side Debit Credit
Normal Bal..
Debit Credit - +
Revenue
Normal Bal..
+ - Left Side Right Side
Cash Debit Credit
Normal Bal..
Supplies - +
Prepaid Insurance Expense and Drawing
Left Side Right Side
Debit Credit
Normal Bal..
Received Cash from Sales $525

What two accounts does it effect?

Cash Sales
What types of accounts are they? Asset
Revenue
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 Received Cash from Sales
Cash Sales
Debit Credit Debit Credit
Normal Bal.. Normal Bal..
+ - - +
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? Asset
Expense
How is each account balanced changed?

Cash Decreases Rent Increase

Expense
How is each amount entered into the T- Accounts
How is each amount entered into
the T- Accounts Paid cash for rent $250
Cash Rent Expense
Debit Credit Debit Credit
Normal Bal.. Normal Bal..
+ - + -
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? Asset
Drawing
How is each account balanced changed?
Ben Furman, Drawing
Cash Decrease
Increase

How is each amount entered into the T- Accounts

How is each amount entered into
the T- Accounts Paid cash to owner for personal
Use $100

Cash Ben Furman, Drawing

Debit Credit Debit Credit
Normal Bal Normal Bal
+ - + -
100 100

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

1. Sold Services on Account Mr. P Hats $100
2. Bought supplies with cash $20
3. Received Cash on Account Mr. L shoes
$40
4. Paid cash to owner personal use $30
5. Bought supplies on account from Mr. C
$50
6. Paid cash on account Mr. C $40
7. Sold Services for cash $50
8. Paid cash for rent $100
Page 58
Prob 2-
1,2,3,4,5
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