14 terms

Accounting 1 Chapter 2

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Terms in this set (...)

T account
an accounting device used to analyze transactions
debit
an amount recorded on the left side of a T account
credit
an amount recorded on the right side of a T account
draw the accounting equation on a T account?
assets always increase on the left (debit) and decrease on right (credit), liability and owners equity always decrease on the left and increase on the right, but when it drawing or expenses it decreases on the right and increase on the left.
what are the two accounting rules that regulate increases and decreases of account balances?
The two basic accounting rules are 1) Account balances increase on the normal balance side of the account. 2)Account balances decrease on the opposite side of the normal balance side of the account.
chart of account
A list of accounts used by a business.
state the four questions used to analyze a transaction
1. Which accounts are effected?
2. How is each account classified?
3. How is each classification changed?
4. How is each amount entered in the accounts?
what two accounts are affected when a business pays cash for supplies
Supplies and accounts payable.
what two accounts are affected when a business receives cash from sales.?
Cash and accounts receivable.
what two accounts are affected when services are sold on account?
Accounts Receivable and Sales are affected.
what two accounts are affected when a business pays cash to the owner for personal use?
Drawing and Cash are affected.
are revenue accounts increased on the debit side or credit side? explain why?
Credit because sales (revenue) ultimately increases owners equity so sales increase on the credit side.
are expenses accounts increased on the debit side or credit side? explain why?
Debit because there are decreases in the owner's capital accounts. The debit balance increases while the credit balance is decreased. Because of expenses decrease owner's equity, increases in expenses are recorded as debits.
normal balance
the side of the account that is increased