What is a transaction Any event that has a financial impact on the business involves All transactions have 2 sides get something give something We must always record both sides Accounts are separated into 3 main types Assets Equity Liabilities Assets include Cash Accounts Receivable Notes Receivable Prepaid Expenses Inventory Liabilities include Accounts Payable Notes Payable Accrued Liabilities Short term loan Equity includes Common Stock Retained Earnings Dividends Accounting Double entry system Land Buildings Equipment Furniture Fixtures Other assets Current portion of long term debt Mortgage Payable Long term Notes Payable o Meaning we record both sides of every transaction Every transaction affects a minimum of 2 accounts The T Account account Record of increases and decreases in a specific asset liability equity revenue or expense Debit means left Credit means right not subtract debit and add credit Accounts with a normal debit balance assets expenses dividends are increased with debits and Accounts with a normal credit balance liabilities equity revenues are increased with credits and decreased with credits decreased with debits Dr Tietz debit credit handout http tiny cc debitcredit Easier way to remember DEALER Increase as debits Increase as credits R L A D E E Dividends Expenses Assets Liabilities Equity Revenues General Journal Listing of all transactions and their accounts Chronological record of transactions General Ledger Transactions are copied posted to the ledger from the journal entries into the specific accounts Trial Balance Lists all accounts with their balances o Assets are listed first then liabilities equity revenue and expenses Used to show that debits equal credits Usually prepared at the end of the period Helps in preparation of the financial statements Trial Balance Cash Other Assets Accounts Payable Other Liabilities Equity Revenue Expenses Total
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