ACCT 200 1st Edition Lecture 4Outline of Last Lecture I. Review of Key Points to Remember II. Transactions JournalIII. Solutions to Brief Exercise 2 – 10 IV. Solutions to E 2 – 3 V. Intro to Debits and CreditsVI. Basic Accounting Equation Expanded – with Debits and CreditsOutline of Current Lecture I. Important Things About Debits and CreditsII. ExampleCurrent LectureWhen you pay a phone bill, you have less cash (asset) and less retained earnings (equity). Cash is decreased, socredited. Retained earnings are going down because an expense went up, and when an expense increases, it is debited. So for every business transaction, there should be a debit and a credit. Total debits must equal total credits in a trial balance (the summary of the ending balance in each account is called a trial balance). Debits are referred to as “left” and credits as “right”. Debits are written above credits, and credits should be indented.Moving debit and credit info from the journal to individual accounts in the general ledger is called “posting”. Assets and expenses should have a debit balanceDividends have to have a debit balanceLiabilities and revenues should have a credit balanceCommon stock has to have a credit balanceA checking account should be a debit but if it has a credit then it is overdrawnIt is rare to credit an expenseExample:Debit Credit(1) Company receives $20,000 cash in exchange for common stockCash 20,000Common Stock 20,000(2) Rented computer for $100/month, made June payment by checkRent expense 100Cash 100(3) Bought supplies on account for $1950Supplies 1950Acct payable 1950(4) Bought furniture - $2500 cash and $1500 on accountEquipment 4000Cash 2500Acct payable 1500(5) Advertised for $200 cashAdv. Expense 200Cash 200(6) Received advance payment of $500Cash 500Unearned revenue 500(7) Paid utilities for June $400Utilities expense 400Cash 400(8) Paid 60% ($900) of a $1500 liabilityAcct payable 900Cash 900(9) Collected fees for $3900Cash 3900Revenue 3900(10) Paid salary of $2000Salary expense 2000Cash
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