Transcript Analyzing Transactions into Debit and Credit Parts

Analyzing Transactions
into Debit and Credit
Parts
Chapter 2
Today’s Objectives
 Engage prior knowledge using critical
thinking skills
 Demonstrate where a debit/credit is
placed in a T-Account
 Become familiar with the key elements
and terms associated with analyzing
transactions into Debit and Credit
parts
Prior Knowledge
• Take out a sheet of paper
• Open Books:
– Page 27
• Read about AAA
• When finished:
– Discuss Critical Thinking #1 & #2 with
people sitting near you
Possible Answers…
• #1
– What asset and liability account might
AAA use to record transactions?
• Assets = Cash, Accounts Receivable, Supplies,
etc. Liability = Accounts Payable
• #2
– List at least two (2) transactions AAA
might record
• Buying supplies for cash
• Buying supplies on account
• Paying cash for salaries
Introduction
• New Vocabulary
–
–
–
–
–
T Account
Debit
Credit
Normal Balance
Chart of Accounts
Section 2-1: Using T Accounts
Accounts
Assets
=
Liabilities + Owner’s Equity
T Account
Debit Side
Credit Side
Accounts
Record summarizing all the information
pertaining to a single item….
• Transactions change the balances of
these accounts
• T account is an accounting device
used to analyze transactions.
• Debit – amount recorded on left
• Credit – amount recorded on right
Account Balances
• Normal balance – the side of the account that is
increased is called the normal balance
• Assets = left side of equation/ normal debit balance
• Liabilities = right side of equation/ normal credit
balance
• Owner’s Equity= right side of equation/ normal
credit balance
Rules –
Two basic accounting rules regulate
increases and decreases in account
balances
1. Account balances increase on the
normal balance side of the account
2. Account balances decrease on the
side opposite of the normal balance.
Debit & Credit
Assets
Debit
Normal
Balance
Credit
Liabilities
Debit
Credit
Normal
Balance
Owner’s Equity
Debit
Credit
Normal
Balance
LET’S LEARN A CHEER!
• Everyone on the LEFT SIDE of the room:
– “DEBITS ON THE LEFT!”
• Everyone of the RIGHT SIDE of the room:
– “CREDITS ON THE RIGHT”
• EVERYONE TOGETHER:
– “STAND UP. SIT DOWN. FIGHT, FIGHT, FIGHT!”
Practice
• Handout
• Working Together
• On Your Own
• Homework:
– Application Problem 2-1
Bell Quiz
1. What new accounting device did
you learn about?
2. What side is the debit?
3. What side is the credit?
4. What does normal balance mean?
5. What is the normal balance for each
of the following: Assets, Liabilities, &
Owner’s Equity?
Bell Quiz - Answers
1.
2.
3.
4.
5.
T – Account
Left
Right
Side the account increases on
Debit, Credit, Credit
Review
• Creating T Accounts – Cheat Sheet
• Go over Homework
• Crossword Puzzle Review
Creating a Cheat Sheet
• Using the color paper make the
following T accounts
• One large one
• Small Assets
• Small Liabilities
• Small Owner’s Equity
– Follow Teacher Direction
2:2 – Analyzing How Transactions
Affect Accounts
Steps to Analyzing a Transaction into
Debit and Credit Parts
1. Which accounts are affected?
2. How is each account classified?
3. How is each classification changed?
4. How is each amount entered in the
accounts?
Received Cash From Owner
Received cash from owner as an investment, $5,000.
Remember:
• Debits must equal credit
Cash
–
–
1.
2.
3.
4.
DEBITS = CREDITS
Total Debits = Total Credits
$5,000
What accounts? - Cash and Capital
Assets & Owner’s Equity
Increased, Increased
Debit, Credit
A list of accounts used by a business is called a chart of
accounts…..(page 3)
OE
$5,000
Paid Cash for Supplies
Paid Cash for Supplies, $275
•
•
•
•
Cash & Supplies
Asset, Asset
Decreased, Increased
Credit, Debit
Paid Cash for Insurance
Paid cash for insurance, $1200.00
Cash and Insurance
Asset & Asset
Decrease(Cash) Increase(PP Insurance)
Credit Cash
Debit PP Insurance
Bought Supplies on Account
Bought Supplies on account from Supply
Depot, $500.00
Supplies
&
Asset
Increase(Supplies)
Debit Supplies
A/P Suppy Depot
Liability
Increase (A/P)
Credit Cash
Paid Cash on Account
Paid Cash on account to Supply Depot,
$300.00.
Cash
&
Asset
Decrease
Credit
A/P Supply Depot
Liability
Decrease
Debit
Practice
• Working Together
• On Your Own
• Application 2-2
Pass Out Note cards INCREASE
Debit
A
s
s
e
t
INCREASE SIDE
D
r
a
w
I
n
g
E
x
p
e
n
s
e
=
L
I
a
b
I
l
i
t
y
O
.
E
.
R
e
v
e
n
u
e
Credit
FLIP THE CARD OVER
Debit
L
I
A
B
I
L
I
T
Y
DECREASE SIDE
O
.
E
.
R
e
v
e
n
u
e
A
s
s
e
t
D
r
a
w
i
n
g
E
x
p
e
n
s
e
Credit
Analyzing How Transactions Affect
Owner’s Equity
Received Cash from Sales, $295
– Revenue increases OE
– Separate account for revenue: Sales
– OE has a Credit normal balance
• Therefore, Revenue has a credit
normal balance
OE, Capital
Cash
$295
Sales
$295
Sold Services on Account
Sold services on account to Oakdale
School, $350.
1.
Which accounts are affected?
1.
2.
Sales
Asset Account
Owner’s Equity
How is each classification changed?
1.
4.
&
How is each account classified?
1.
3.
Accounts Receivable-Oakdale Schools
Increases
Increases
How is each amount entered in the accounts?
1.
Debit A/R
A/R Oakdale School
$350
Credit Sales
Sales
$350
Paid Cash for an Expense
Paid cash for Rent, $300
• Expenses decrease OE
• Separate expense accounts are used to summarize
these decreases
– Rent Expense
• O.E. has normal credit balance
– Therefore, Rent Expense has a normal debit balance
since it decreases OE
Rent Expense
$300
Cash
$300
Received Cash on Account
Received cash on account from
Oakdale School, $200.
1.
Which accounts are affected?
1.
2.
Accounts Receivable-Oakdale Schools
Asset
Asset
How is each classification changed?
1.
4.
&
How is each account classified?
1.
3.
Cash
Increases
Decreases
How is each amount entered in the accounts?
1.
Debit Cash
Cash
$200
A/R Oakdale Schools
A/R Oakdale School
$200
Paid Cash to Owner for Personal Use
Paid cash to owner for personal use,
$125.
•
•
1.
Withdrawals decrease OE
Normal Debit balance
Which accounts are affected?
1.
2.
Cash
O.E.
Asset
How is each classification changed?
1.
4.
&
How is each account classified?
1.
3.
Kim Park, Drawing
Decreases
Decreases
How is each amount entered in the accounts?
1.
Debit Kim Park, Drawing
Kim Park, Drawing
$125
Cash
Cash
$125
ADE=LOR vs. LOR=ADE
• SIMPLY stated: ADE=LOR for the
POSITIVE/normal balance side (and
vice versa); LOR=ADE for the
DECREASE side.
• Make a note card!
Practice
• Working Together
• On Your Own
• Application Problem 2-3
Group Exercise
• Analyzing T- Account
– Based on the information recorded on
your t-accounts, Determine the
transaction by analyzing the way it was
recorded.
• Share
Individual Review
• Audit your Understanding p. 37 and 44
• Audit Test
• Go over Homework
• Introduce DEAD COIL
• Application Problems 2-4, 2-5, 2-6
Review Day – Preparing for Test
• In the Life of a Credit Union
• Class Cheer
• Cases and Auditing for Errors
• Study Guide – Pairs
• Catch Phrase
• Review Game
A Life With A Credit Union Activity
• In your group listen to the following
story
• When I say debit pass your pencils to
the left!
• When I say credit pass your pencils to
the right!
Class Cheer
Debits on the Left
Credits on the Right
Stand up, Sit Down
Fight Fight Fight!
Practice/ Assignments
• Cases page 50
• Auditing for errors
• Study Guide – Pairs
• Catch Phrase
• Review Game