College AccountingHeintz & ParryHeintz & Parry2020ththEditionEditionThe Double-Entry Framework3Chapter1Define the parts of a T account.The T AccountDebit CreditSHAPEDLIKE a “T”The T AccountDebit CreditDebitmeans LeftCreditmeansRightThe T AccountDr. Cr.Abbreviationfor DebitAbbreviation for CreditThe T AccountDr. Cr.CASHThe T Account• Every T account has an increase side and a decrease side• Some accounts increase on the debit side and some accounts increase on the credit side2Foot and balance a T account.Balancing a T AccountSTEP #2: Find the balance by finding the difference between the debit and credit totals.$3,500 debit footing– 3,130 credit footing$ 370 balanceBalancing a T AccountCASH2,0005005704303,5001,20030020050802003006501503,130Balancing A T AccountCASH2,0005005704303,5001,20030020050802003006501503,1303703Describe the effects of debits and credits on specific types of accounts. 7 Rules of Debits and Credits Rule #1Dr. Cr.+–Rule #2In every transaction, debits must equal credits.Rule #3Dr. Cr.+–Rule #4Dr. Cr.+–Rule #5Dr. Cr.+–Rule #6Dr. Cr.+–Rule #7Dr. Cr.+–4Use T accounts to analyze transactions. ExamplePurchased office supplies for $800 cash.1stSTEP Identify the accounts that are affected.2ndSTEP Classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.3rdSTEP Identify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.CASHDR. CR.+OFFICE SUPPLIESDR. CR.+– –Purchased Office Supplies for $800 CashOFFICE SUPPLIESDR. CR.800+–Purchased Office Supplies for $800 CashCASHDR. CR.800+–Debits = CreditsDR.CASH+800CR.OFFICE SUPPLIESDR. CR.800+––ExamplePurchased equipment on account for $3,000.1stSTEP Identify the accounts that are affected.2ndSTEP Classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.3rdSTEP Identify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.EQUIPMENTDR. CR.+ACCOUNTS PAYABLEDR. CR.+– –Purchased Equipment on Account for $3,000EQUIPMENTDR. CR.3,000+–Purchased Equipment on Account for $3,000ACCOUNTS PAYABLEDR. CR.3,000+–Debits = CreditsDR.ACCOUNTS PAYABLE+3,000CR.EQUIPMENTDR. CR.3,000+––ExampleMary Adams, the owner, invested $25,000 in the business.1stAND 2ndSTEPS Identify the accounts that are affected and classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.M. ADAMS, CAPITAL CASHDR. CR. DR. CR.3rdSTEPIdentify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.CASHDR. CR.+M. ADAMS, CAPITALDR. CR.+––Increased Or Decreased?CASHDR. CR.+M. ADAMS, CAPITALDR. CR.+25,000 25,000––Debits = CreditsDR.M. ADAMS, CAPITAL+25,000CR.CASHDR. CR.+25,000––ExampleMary withdrew $1,500 for personal expenses.1stAND 2ndSTEPS Identify the accounts that are affected and classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.M. ADAMS, DRAWINGCASHDR. CR. DR. CR.3rdSTEPIdentify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.CASHDR. CR.+M. ADAMS, DRAWINGDR. CR.+––Increased Or Decreased?CASHDR. CR.+M. ADAMS, DRAWINGDR. CR.1,500 1,500+– –Debits = CreditsDR.M. ADAMS, DRAWING1,500CR.CASHDR. CR.1,500++––ExampleMary performed services and received $4,500 in cash.1stAND 2ndSTEPS Identify the accounts that are affected and classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.CONSULTING FEES CASHDR. CR. DR. CR.3rdSTEP Identify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.CASHDR. CR.CONSULTING FEESDR. CR.++––Increased Or Decreased?CASHDR. CR.CONSULTING FEESDR. CR.4,500 4,500++– –Debits = CreditsDR.CONSULTING FEES4,500CR.CASHDR. CR.4,500++––ExampleMary performed $6,000 of services on account.Debits = CreditsDR.CONSULTING FEES6,000CR.ACCOUNTS RECEIVABLEDR.CR.6,000++– –ExampleMary Adams paid her assistant $750 in wages.1stAND 2ndSTEPS Identify the accounts that are affected and classify these accounts as assets, liabilities, owner’s equity, revenues, or expenses.WAGES EXPENSE CASHDR. CR. DR. CR.3rdSTEPIdentify the location of the accounts in the accounting equation and/or the owner’s equity umbrella—left or right.CASHDR. CR.WAGES EXPENSEDR. CR.+ +––Increased Or Decreased?CASHDR. CR.WAGES EXPENSE DR. CR.750750++––Debits = CreditsDR.CASH750CR.WAGES EXPENSEDR. CR.750+ +––5Prepare a trial balance and explain and explain its purposes and linkages with the financial statements. The Trial Balance• A listing of all accounts and their balances• A totaling of debits and credits• Is proof that debits equal credits and that the accounting equation has remained in balance• Used as an aid in preparing financial statementsJessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit Balance Account Title Debit Balance Credit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery Equipment370 00650 00200 003,600 0080 00Jessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts Payable370 00650 00200 003,600 00 1,800 00Jessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts PayableJessica Jane, CapitalJessica Jane, Drawing370 00650 00200 003,600 001,800 002,000 0080 00150 00Jessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts PayableJessica Jane, CapitalJessica Jane, DrawingDelivery Fees370 00650 00200 003,600 001,800 002,000 0080 00150 002,150 00Jessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts PayableJessica Jane, CapitalJessica Jane, DrawingDelivery FeesRent ExpenseTelephone ExpenseWages Expense370 00650 00200 003,600 001,800 002,000 0080 00150 002,150 00200 0050 00650 00Jessie Jane’s Campus DeliveryTrial BalanceJune 30, 20--Account Title Debit Balance Credit BalanceCashAccounts