02 Powerpoint

Chapter Two
T Accounts, Debits
and Credits, Trial
Balance, and
Financial Statements
Performance Objectives
1. Determine balances of T accounts having

entries recorded on both sides of the
accounts
2. Present the fundamental accounting
equation with the T account form, and label
the debit and credit sides
3. Record directly in T accounts a group of
business transactions involving changes in
asset, liability, owner’s equity, revenue, and
expense accounts for a service business
Accounting Is Fun! 2-2

Performance Objectives
4. Prepare a trial balance

5. Prepare:
– Income statement
– Statement of owner’s equity
– Balance sheet
6. Recognize the effect of transpositions
and slides on account balances

T Account Form
• Shaped like the letter
T
• One side for increases
(+) to the account
• The other side for
decreases (-) to the
account
• Normal Balance
– The increase (plus)
side of any T account.
34,120

Compare Account Column to T Account
34,120

Debit & Credit
• What does Debit • What does Credit
mean? mean?
– Forget what you – Forget what you
know about debit know about credit
cards! cards!

In Accounting
• Debit = Left • Credit = Right

• Debit = DR = Left • Credit = CR = Right

T Accounts
• Assets Assets
– The plus side for + -
assets is placed on
the left, and the DR CR
minus side is placed
on the right

T Accounts
• Liabilities and Liabilities

owner’s equity
- +
– Since these
classifications are DR CR
placed on the
opposite side of the
equals sign, the plus
Owner's Equity
and minus signs are
also placed on the - +
opposite sides DR CR
(switched around)

In Accounting
Asset = Liabilities + Owner's Equity

DR CR DR CR DR CR
• Debit is Left
• Credit is Right
• DR is Left
• CR is Right
• For every account this is true!

Accounting Is Fun! 2 - 10
T Accounts
• Recall that we placed revenue and expenses under
the umbrella of owner’s equity
• Revenue increases owner’s equity
• Expenses decrease owner’s equity
Assets = Liabilities + Owner's Equity
+ - - + - +
DR CR DR CR DR CR
- Expenses + Revenues
+ - - +
DR CR DR CR
• Remember:
– Drawing is placed
under the umbrella of - Drawing + Capital
+ - - +
the Capital account DR CR DR CR
Present The Fundamental Accounting Equation With The T
Account Form, And Label The Debit And Credit Sides As
Well As The Plus And Minus Sides
Assets = Liabilities + Owner's Equity + Revenues - Expenses

+ - - + - + - + + -
DR CR DR CR DR CR DR CR DR CR
•We switch the plus and minus signs around on the

other side of the equals sign so that we will be able to
carry out double-entry accounting
•Whenever there is a minus in front of the account, we

must “switch the plus & minus around”
Debits Must Always Equal Credits
DR = CR
Assets = Liabilities + Owner's Equity + Revenues - Expenses

+ - - + - + - + + -
DR CR DR CR DR CR DR CR DR CR
The critical rule to remember is that the amount

placed on the debit side of one or more accounts
MUST equal that amount placed on the credit
side of another account or accounts.
Record Directly In T Accounts A Group Of Business
Transactions Involving Changes In Asset, Liability,
Owner’s Equity, Revenue, And Expense Accounts
For A Service Business
Step 1 Step 3
– Which accounts are – Are the accounts
involved? increased or decreased?
Step 2 Step 4
– How should you classify – Which accounts are
the accounts? debited and which
• Asset accounts are credited?
• Liability Step 5
• Capital – Balance the equations:
• Revenue – DR = CR
• Expenses – A = L + OE
Recording Business Transactions for a
Service Business
We will be recording business transactions

for a company with the following details:
Owner name: L. P. Arch

Business name: Arch Copy Co.
Business type: Sole proprietorship
(one-person business)
Assets = Liabilities + Owner's Equity + Revenue – Expenses
+ – – + – + – + + –
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash Accounts Payable L.P. Arch, Capital Income from Services Wages Expense
+ – – + – + – + + –
a) 70,000 a) 70,000
Rent Expense
+ –
L.P. Arch, Drawing Debit Credit
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
Accounts Receivable + –
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
Prepaid Insurance Debit Credit
+ –
Debit Credit
Equipment Transaction (a): Arch deposited $70,000

+ –
Debit Credit in a bank account in name of business.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 a) 70,000
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (b): Bought equipment, paying

+ –
b)
Debit
33,000
Credit cash, $33,000.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 c) 7,000 a) 70,000
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (c): Bought equipment on

+ –
b)
Debit
33,000
Credit account from Melton Office Supply,
c) 7,000
$7,000.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000
d) 2,000
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (d): Paid Melton Office

+ –
b)
Debit
33,000
Credit Supply, a creditor, $2,000.
c) 7,000
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000
d) 2,000 e) 6,200
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (e): Arch invested her personal

+ –
b)
Debit
33,000
Credit computer equipment having a fair market
c)
e)
7,000
6,200 value of $6,200 in Arch Copy Co.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 e) 6,200
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (f): Arch Copy Co. sold

+ –
b)
Debit
33,000
Credit services for cash, $2,520.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 e) 6,200
g) 700 Rent Expense
+ –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (g): Paid rent for the

+ –
b)
Debit
33,000
Credit month, $700.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 h) 600 e) 6,200
g) 700 Rent Expense
+ –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
Equipment Transaction (h): Bought supplies (toner

+ –
b)
Debit
33,000
Credit and paper) on credit. These supplies are
c)
e)
7,000
6,200 used immediately; therefore, they are
recorded as an expense ($600).
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 h) 600 e) 6,200
g) 700 Rent Expense
i) 360 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit
Utilities Expense
+ –
+ –
Debit Credit
i) 360
Equipment Transaction (i): Arch Copy Co. paid

+ –
b)
Debit
33,000
Credit $360 for a one-year liability insurance
c)
e)
7,000
6,200 policy.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 h) 600 e) 6,200
g) 700 j) 200 Rent Expense
i) 360 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
Utilities Expense
+ –
+ –
Debit Credit
i) 360
Equipment Transaction (j): Received bill for

+ –
b)
Debit
33,000
Credit newspaper advertising, $200.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 h) 600 e) 6,200 k) 1,050
i) 360 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ –
Debit Credit
i) 360
Equipment Transaction (k): Arch Copy Co. completed

+ –
b)
Debit
33,000
Credit a printing job and billed Walker Company
c)
e)
7,000
6,200 $1,050 for services performed.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
i) 360 + –
l) 1,800 L.P. Arch, Drawing Debit Credit
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ –
Debit Credit
i) 360
Equipment Transaction (l): Arch Copy Co. paid $1,800

+ –
b)
Debit
33,000
Credit to Melton Office Supply, its creditor, as part
c)
e)
7,000
6,200 payment on account.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
i) 360 + –
m) 160 + - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (m): Arch Copy Co.

+ –
b)
Debit
33,000
Credit received and paid electric bill, $160.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
g) 700 n) 200 j) 200 Rent Expense
i) 360 + –
m) 160 + - g) 700
n) 200 Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (n): Arch Copy Co. paid on

+ –
b)
Debit
33,000
Credit account $200 to City News for advertising.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
i) 360 + –
m) 160 + - g) 700
n) 200 Debit Credit
o) 2,130 Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (o): Arch Copy Co. paid

+ –
b)
Debit
33,000
Credit wages of a part-time employee, $2,130.
c) 7,000
e) 6,200
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
i) 360 p) 2,900 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (p): Bought additional

+ –
b)
Debit
33,000
Credit equipment from Melton Office Supply,
c)
e)
7,000
6,200 $3,520, paying $620 down with the
p) 3,520
remaining $2,900 on account.
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
q) 850 g) 700 n) 200 j) 200 Rent Expense
i) 360 p) 2,900 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050 q) 850
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (q): Arch Copy Co. received

+ –
b)
Debit
33,000
Credit $850 cash on account from a credit
c)
e)
7,000
6,200 customer.
p) 3,520
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
q) 850 g) 700 n) 200 j) 200 r) 4,220 Rent Expense
r) 4,220 i) 360 p) 2,900 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050 q) 850
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (r): Arch Copy Co. received

+ –
b)
Debit
33,000
Credit revenue from cash customers for the rest
c)
e)
7,000
6,200 of the month, $4,220.
p) 3,520
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
r) 4,220 i) 360 p) 2,900 + –
m) 160 + - g) 700
n) 200 Debit Credit
o) 2,130 s) 2,500 Supplies Expense
p) 620 + –
s) 2,500 Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050 q) 850
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
Equipment Transaction (s): Arch withdrew $2,500 in

+ –
b)
Debit
33,000
Credit cash from the business for her personal
c)
e)
7,000
6,200 use.
p) 3,520
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
q) 850 g) 700 n) 200 j) 200 76,200 r) 4,220 Rent Expense
r) 4,220 i) 360 4,000 p) 2,900 7,790 + –
77,590 l) 1,800 10,700 L.P. Arch, Drawing Debit Credit
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
43,470 h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050 q) 850
Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
+
Equipment
Debit
–
Credit
Footing
b) 33,000
c) 7,000
e) 6,200
p) 3,520
49,720
+ – – + – + – + + –
+ – – + – + – + + –
a) 70,000 b) 33,000 d) 2,000 c) 7,000 a) 70,000 f) 2,520 o) 2,130
f) 2,520 d) 2,000 l) 1,800 h) 600 e) 6,200 k) 1,050
q) 850 g) 700 n) 200 j) 200 Bal. 76,200 r) 4,220 Rent Expense
r) 4,220 i) 360 4,000 p) 2,900 Bal. 7,790 + –
77,590 l) 1,800 10,700 L.P. Arch, Drawing Debit Credit
m) 160 Bal. 6,700 + - g) 700
n) 200 Debit Credit
p) 620 + –
Bal. 34,120 43,470 h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 1,050 q) 850
Bal. 200 Utilities Expense
+ –
+ – m) 160
Debit Credit
i) 360
+
Equipment
Debit
–
Credit
Balances
b) 33,000
c) 7,000
e) 6,200
p) 3,520
Bal. 49,720
Performance Objective 5
Prepare a trial balance
Prepare a Trial Balance
• List the account balances in two

columns
– Left column = Debits
– Right column = Credits
• List the accounts in the same order as
the chart of accounts
– First the balance sheet accounts
– Then the income statement accounts
Trial Balance
• A trial run to prove that DR = CR
• If DR = CR, then A = L + OE
Trial Balance
• Not a financial statement
• Don’t use dollar signs
• Use a single underline under the list of figures
to be added
• Use a double underline under column totals
Accounting
Process of:
• Analyzing Summarizing means
• Classifying preparing financial
• Recording statements
• Summarizing
• Interpreting business transactions
Prepare
– Income statement
– Statement of owner’s equity
– Balance sheet
All Financial Statements
• Summarize useful financial information

for users of accounting information:
– Owners/investors
– Managers
– Creditors
– Government agencies
All Financial Statements
• Have a three-line title

– Who: Name of the company (or owner)
– What: Title of financial statement
– When: Period of time or a single date
Income Statement
Or Balance Sheet
Statement of OE
Income Statement
Total Revenue – Total Expenses = Net Income (or Net Loss)
Income Statement
• Answers the questions
– How profitable was the Revenues
company over the past period? – Expenses
– How much net income did the
entity earn? Net Income
What the Income Statement Tells Us
• Is the business profitable?
• What is the net income?
– Revenue > Expenses
• What is the net loss?
– Expenses > Revenue
Income Statement
• Income Statement—Also Known As

– Statement of income and expenses
– Profit and loss statement
– Results of operations
• Net Income—Also Known As

– Profit
– Earnings
Net Income
• Use the net income figure on the income

statement to complete the statement of
owner’s equity
Statement of Owner’s Equity
• Prepared after you finish the income statement
– How did the owner’s equity change over the last period?
– How and why did the Capital account change?
• Provides ending Capital amount for use on the
balance sheet
00
Additional Investment in the Company
• Can you invest assets other than cash?

– Tools?
– Trucks?
– Equipment?
• Yes!
– They must be recorded at their fair market
value (what they would be sold for on the
open market)
Balance Sheet
Balance Sheet

– What is the entity’s financial position on the last
day of the period?
– What assets, liabilities, and equities does the
entity have on the last day of the period?
• Uses the ending capital figure shown on the
statement of owner’s equity
• Resembles a snapshot—shows a point in
time
• Be careful of the date!
Balance Sheet
• List accounts in the same order as the chart of accounts
• Why?
– Listed in order of liquidity
– Liquidity: How quickly it can be turned into cash
• Report Form
– Balance Sheet presentation where Assets are above Liabilities and
Owner’s Equity
Errors Exposed by the Trial Balance
• DR ≠ CR? • DR ≠ CR?
• Arithmetic error • Both sides of an entry
– Trial balance columns on one side (two DRs)
added correctly? – Example: If the Trial
Balance is off by $200,
– Accounts added divide by 2 to get $100
correctly? and look for transactions
• Half an entry for the amount $100
($100 DR to Cash and
– DR without a CR? $100 DR to Revenue)
– Example: If Trial Balance • Recording amounts
is off by $100, did you incorrectly
record the DR without the – Look back to original
CR? receipt, source
document, or problem
Errors Exposed by the Trial Balance
When DR = CR, there can still be an error

if you:
– Forgot to record a transaction
– Recorded the transaction twice
– Recorded the transaction for an incorrect
amount
– Recorded the amount in the incorrect
account
How Do You Find the Errors?
• Pay careful attention as you record

transactions.
• Look to see if a normal balance was
placed in the wrong column.
• Re-add the columns.
• Check to see if account totals were
transferred correctly.
• Recalculate the footings and balances
in the accounts.
Recognize the effect of transpositions

and slides on account balances
Transpositions and Slides
• Transposition error
– Digits have been transposed (switched around)
• Slide error
– The decimal point in an amount has been
misplaced
– “Slide the decimal place”
Difference after If evenly divided by
subtracting the DR 9, then you have a
The other DR or CR and CR side of the Transposition, Slide,
Error Type DR or CR written as: written as: Trial Balance Both
96 69 27 3
549 945 -396 -44
197 791 -594 -66
513 315 198 22
27430 2743 24687 2743
230 23 207 23
44 440 -396 -44
430 34 396 44
64390 9436 54954 6106
Transpositions and Slides
• Finding an error
– Divide the difference between two trial
balance totals by 2, or multiply by 2. See if
the result matches a transaction amount.
– Errors divisible by 9: If an error exists and
the amount of difference between the totals
of the trial balance is evenly divisible by 9,
the error consists of either a transposition
or a slide or both.
Demonstration Problem
We will be recording business

transactions for a company with the
following details:
Owner name: R. P. Nelson
Business name: WindSport Boomerang & Kite Demos
Business type: Sole proprietorship
(one-person business)
+ – – + – + – + + –
Cash Accounts Payable R. P. Nelson, Capital Income from Demos Wages Expense
+ – – + – + – + + –
a) 43,000 a) 43,000
Rent Expense
+ –
R. P. Nelson, Drawing Debit Credit
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (a): Nelson deposited $43,000 in a

+
Debit
–
Credit
bank account in the name of business.
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 a) 43,000
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (b): Bought truck, paying cash,

+
Debit
–
Credit
$23,000.
b) 23,000
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 c) 2,500 a) 43,000
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (c): Bought camper shell for truck on

+
Debit
–
Credit
account from Louie's Trucks & Campers, $2,500.
b) 23,000
c) 2,500
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000
d) 1,500
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (d): Paid Louie's Trucks &

+
Debit
–
Credit
Campers, a creditor, $1,500.
b) 23,000
c) 2,500
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000
d) 1,500 e) 3,400
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (e): Nelson invested his own personal

+
Debit
–
Credit
computer equipment, having a fair market value of
b)
c)
23,000
2,500
$3,400, in WindSport Boomerang & Kite Demos.
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 e) 3,400
Rent Expense
+ –
+ -
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (f): Nelson and employee

+
Debit
–
Credit
performed boomerang & kite demo for Girl
b)
c)
23,000
2,500
Scouts and received cash, $2,500.
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 e) 3,400
g) 700 Rent Expense
+ –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment Transaction (g): Paid rent for the month,

+
Debit
–
Credit
$700.
b) 23,000
c) 2,500
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500.0
f) 2,500 d) 1,500 h) 600 e) 3,400
g) 700 Rent Expense
+ –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
Equipment
Transaction (h): WindSport B&K Demos bought
+
Debit
–
Credit
supplies (toner and paper) on credit. These supplies
b)
c)
23,000
2,500
are used immediately so they are recorded as an
e) 3,400
expense ($600).
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 h) 600 e) 3,400
g) 700 Rent Expense
i) 2,000 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit
Traveling Expense
+ –
+ –
Debit Credit
i) 2,000
Equipment
Transaction (i): WindSport B & K Demos paid
+
Debit
–
Credit
$2,000 for a one-year liability insurance policy.
b) 23,000
c) 2,500
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 h) 600 e) 3,400
i) 2,000 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
Traveling Expense
+ –
+ –
Debit Credit
i) 2,000
Equipment Transaction (j): WindSport B & K Demos

+
Debit
–
Credit
received an advertising bill from City News for
b)
c)
23,000
2,500 advertising, $200.
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 h) 600 e) 3,400 k) 2,500
i) 2,000 + –
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ –
Debit Credit
i) 2,000
Equipment Transaction (k): Nelson and employee performed

+
Debit
–
Credit
boomerang & kite demo for Boy Scouts and earned
b)
c)
23,000
2,500
income on account ("sold services on account"),
e) 3,400
$2,500.
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
i) 2,000 + –
l) 1,000 R. P. Nelson, Drawing Debit Credit
+ - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ –
Debit Credit
i) 2,000
Equipment Transaction (l): WindSport B & K Demos paid

+
Debit
–
Credit
$1,000 to Louie's Trucks & Campers, its creditor,
b)
c)
23,000
2,500
as final payment on account.
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
i) 2,000 + –
m) 160 + - g) 700
Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (m): WindSport B & K Demos received

+
Debit
–
Credit
and paid the gas card bill, $160 (Traveling Expense).
b) 23,000
c) 2,500
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
i) 2,000 + –
m) 160 + - g) 700
n) 200 Debit Credit
Supplies Expense
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (n): WindSport B & K Demos pays

+
Debit
–
Credit
$200 on account to City News for advertising.
b) 23,000
c) 2,500
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
i) 2,000 + –
m) 160 + - g) 700
n) 200 Debit Credit
+ –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (o): WindSport B & K Demos pays

+
Debit
–
Credit
wages for a part-time employee, $1,030.
b) 23,000
c) 2,500
e) 3,400
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
i) 2,000 p) 1,500 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (p): WindSport B&K Demos buys

+
Debit
–
Credit
a trailer from Louie's Trucks & Campers for $2,120,
b)
c)
23,000
2,500
paying $620 down with the remaining $1,500 on
e)
p)
3,400
2,120 account (Equipment, A/P, and Cash accounts).
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
q) 850 g) 700 n) 200 j) 200 Rent Expense
i) 2,000 p) 1,500 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500 q) 850
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (q): WindSport B & K Demos receives

+
Debit
–
Credit
$850 cash on account from a credit customer.
b) 23,000
c) 2,500
e) 3,400
p) 2,120
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
r) 4,220 i) 2,000 p) 1,500 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
Debit Credit
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500 q) 850
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (r): WindSport B & K Demos receives

+
Debit
–
Credit
revenue from cash customers for the rest of the
b)
c)
23,000
2,500
month, $4,220.
e) 3,400
p) 2,120
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
r) 4,220 i) 2,000 p) 1,500 + –
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500 q) 850
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
Equipment Transaction (s): Nelson withdraws $2,500 in

+
Debit
–
Credit
cash from the business for his personal living
b)
c)
23,000
2,500 costs.
e) 3,400
p) 2,120
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
q) 850 g) 700 n) 200 j) 200 46,400 r) 4,220 Rent Expense
r) 4,220 i) 2,000 2,700 p) 1,500 9,220 + –
50,570 l) 1,000 4,800 R. P. Nelson, Drawing Debit Credit
m) 160 + - g) 700
n) 200 Debit Credit
p) 620 + –
32,710 h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500 q) 850
Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
+
Equipment
Debit
–
Credit
Footing
b) 23,000
c) 2,500
e) 3,400
p) 2,120
31,020
+ – – + – + – + + –
+ – – + – + – + + –
a) 43,000 b) 23,000 d) 1,500 c) 2,500 a) 43,000 f) 2,500 o) 1,030
f) 2,500 d) 1,500 l) 1,000 h) 600 e) 3,400 k) 2,500
q) 850 g) 700 n) 200 j) 200 Bal. 46,400 r) 4,220 Rent Expense
r) 4,220 i) 2,000 2,700 p) 1,500 Bal. 9,220 + –
50,570 l) 1,000 4,800 R. P. Nelson, Drawing Debit Credit
m) 160 Bal. 2,100 + - g) 700
n) 200 Debit Credit
p) 620 + –
Bal. 17,860 32,710 h) 600
Advertising Expense
+ – Debit Credit
Debit Credit j) 200
k) 2,500 q) 850
Bal. 1,650 Traveling Expense
+ –
+ – m) 160
Debit Credit
i) 2,000
+
Equipment
Debit
–
Credit
Balances
b) 23,000
c) 2,500
e) 3,400
p) 2,120
Bal. 31,020
Trial Balance
WindSport Boomerang & Kite Demos
Trial Balance
June 30, 2003
Cash 17,860
Accounts Receivable 1,650
Prepaid Insurance 2,000
Equipment 31,020
Accounts Payable 2,100
R. P. Nelson, Capital 46,400
R. P. Nelson, Drawing 2,500
Income from Demos 9,220
Wages Expense 1,030
Rent Expense 700
Supplies Expense 600
Advertising Expense 200
Traveling Expense 160
57,720 57,720
Income Statement
Income Statement
For Month Ended June 30, 2003
Revenues:
Income from Demos $ 9,220
Expenses:
Wages Expense $ 1,030
Rent Expense 700
Supplies Expense 600
Advertising Expense 200
Traveling Expense 160
2,690
$ 6,530
Statement of Owner’s Equity
Statement of Owner's Equity
For Month Ended June 30, 2003
R. P. Nelson, Capital, June 1, 2003 $ 46,400
Net Income for June $ 6,530
Less Withdrawals for June 2,500
Increase in Capital 4,030
R. P. Nelson, Capital, June 30, 2003 $ 50,430
Balance Sheet
Balance Sheet
June 30, 2003
Assets
Cash $ 17,860
Accounts Receivable 1,650
Prepaid Insurance 2,000
Equipment 31,020
$ 52,530
Liabilities
Accounts Payable $ 2,100
Owner's Equity
R. P. Nelson, Capital 50,430
Total Liabilities and Owner's Equity $ 52,530

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Chapter Two

1. Determine balances of T accounts having

Accounting Is Fun! 2-2

4. Prepare a trial balance

Accounting Is Fun! 2-3

Accounting Is Fun! 2-4

Accounting Is Fun! 2-5

Accounting Is Fun! 2-6

• Debit = Left • Credit = Right

Accounting Is Fun! 2-7

Accounting Is Fun! 2-8

• Liabilities and Liabilities

Accounting Is Fun! 2-9

Asset = Liabilities + Owner's Equity

• For every account this is true!

Assets = Liabilities + Owner's Equity + Revenues - Expenses

•We switch the plus and minus signs around on the

•Whenever there is a minus in front of the account, we

Assets = Liabilities + Owner's Equity + Revenues - Expenses

The critical rule to remember is that the amount

We will be recording business transactions

Owner name: L. P. Arch

Equipment Transaction (a): Arch deposited $70,000

Equipment Transaction (b): Bought equipment, paying

Equipment Transaction (c): Bought equipment on

Equipment Transaction (d): Paid Melton Office

Equipment Transaction (e): Arch invested her personal

Equipment Transaction (f): Arch Copy Co. sold

Equipment Transaction (g): Paid rent for the

Equipment Transaction (h): Bought supplies (toner

Equipment Transaction (i): Arch Copy Co. paid

Equipment Transaction (j): Received bill for

Equipment Transaction (k): Arch Copy Co. completed

Equipment Transaction (l): Arch Copy Co. paid $1,800

Equipment Transaction (m): Arch Copy Co.

Equipment Transaction (n): Arch Copy Co. paid on

Equipment Transaction (o): Arch Copy Co. paid

Equipment Transaction (p): Bought additional

Equipment Transaction (q): Arch Copy Co. received

Equipment Transaction (r): Arch Copy Co. received

Equipment Transaction (s): Arch withdrew $2,500 in

Prepare a trial balance

• List the account balances in two

• Summarize useful financial information

• Have a three-line title

Total Revenue – Total Expenses = Net Income (or Net Loss)

• Income Statement—Also Known As

• Net Income—Also Known As

• Use the net income figure on the income

• Can you invest assets other than cash?

• Answers the questions

When DR = CR, there can still be an error

• Pay careful attention as you record

Recognize the effect of transpositions

We will be recording business

Equipment Transaction (a): Nelson deposited $43,000 in a

Equipment Transaction (b): Bought truck, paying cash,

Equipment Transaction (c): Bought camper shell for truck on

Equipment Transaction (d): Paid Louie's Trucks &

Equipment Transaction (e): Nelson invested his own personal

Equipment Transaction (f): Nelson and employee

Equipment Transaction (g): Paid rent for the month,

Equipment Transaction (j): WindSport B & K Demos