Transcript Understanding Debits and Credits in Accounting C2 - 1 Presentation Outline I. An Account II.

Understanding Debits and Credits
in Accounting
C2 - 1
Presentation Outline
I.
An Account
II. Normal Balances
III. Recording and Posting Transactions
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I. An Account
A. Three Parts of an Account
B. Determining the Balance of an
Account
C. Balance Examples
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A. Three Parts of an Account
(1) Account Title
(2) Left Side
(3) Right Side
is a Debit
is a Credit
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B. Determining the Balance of an
Account
Obtain a total for both debits if credits.
If:
Total Debits > Total Credits = Debit Balance
Total Debits < Total Credits = Credit Balance
Total Debits = Total Credits = Zero Balance
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C. Balance Examples
What is the balance of the following accounts:
Cash
Accounts Payable
12,000
2,000
3,000
6,000
2,000
1,000
2,000
9,000
11,000
10,000
Debit
Credit
Balance
Balance
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II. Normal Balances
A. Increasing and Decreasing Accounts
B. Account Normal Balances
C. Components of Owner’s Equity
What is
normal
for you?
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A. Increasing and Decreasing
Accounts
Accounts have a normal balance of either a
debit or a credit (but not both).
An entry on the side of an account’s normal
balance will increase the account.
An entry on the opposite side of an account’s
normal balance will decrease the account. C2 - 8
B. Account Normal Balances
Assets
=
Liabilities
+
Capital
Debits
Credits
Debits
Credits
Debits
Credits
Increase
Decrease
Decrease
Increase
Decrease
Increase
Normal
Normal
Normal
Balance
Balance
Balance
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C. Components of Owner’s Equity
Negative Components of
Owner’s Equity
Withdrawals
Expenses
Positive Component
Of
Owner’s Equity
Revenues
Debits
Credits
Debits
Credits
Debits
Credits
Increase
Decrease
Increase
Decrease
Decrease
Increase
Normal
Normal
Normal
Balance
Balance
Balance
Remember that the normal balance of owner’s equity is a
credit.
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