Analyzing Transactions into Debit and Credit Parts

1
Analyzing Transactions into Debit and Credit
Parts

• Chapter 2

2
Todays Objectives

• Engage prior knowledge using critical thinking
  skills
• Demonstrate where a debit/credit is placed in a
  T-Account
• Become familiar with the key elements and terms
  associated with analyzing transactions into Debit
  and Credit parts

3
Prior Knowledge

• Take out a sheet of paper
• Open Books
• Page 27
• Read about AAA
• When finished
• Discuss Critical Thinking 1 2 with people
  sitting near you

4
Possible Answers

• 1
• What asset and liability account might AAA use to
  record transactions?
• Assets Cash, Accounts Receivable, Supplies,
  etc. Liability Accounts Payable
• 2
• List at least two (2) transactions AAA might
  record
• Buying supplies for cash
• Buying supplies on account
• Paying cash for salaries
• Receiving cash for memberships

5
Introduction

• New Vocabulary
• T Account
• Debit
• Credit
• Normal Balance
• Chart of Accounts

6
Section 2-1 Using T Accounts

• Accounts
• Assets
  Liabilities Owners Equity

T Account
Debit Side
Credit Side
7
Accounts

• Record summarizing all the information pertaining
  to a single item.
• Transactions change the balances of these
  accounts
• T account is an accounting device used to analyze
  transactions.
• Debit amount recorded on left
• Credit amount recorded on right

8
Account Balances

• Normal balance the side of the account that is
  increased is called the normal balance
• Assets left side of equation/ normal debit
  balance
• Liabilities right side of equation/ normal
  credit balance
• Owners Equity right side of equation/ normal
  credit balance

9
Rules

• Two basic accounting rules regulate increases and
  decreases in account balances
• Account balances increase on the normal balance
  side of the account
• Account balances decrease on the side opposite of
  the normal balance.

10
Debit Credit
Assets
Liabilities
Owners Equity
Debit
Debit
Credit
Credit
Debit
Credit
Normal Balance
Normal Balance
Normal Balance
11
LETS LEARN A CHEER!

• Everyone on the LEFT SIDE of the room
• DEBITS ON THE LEFT!
• Everyone of the RIGHT SIDE of the room
• CREDITS ON THE RIGHT
• EVERYONE TOGETHER
• STAND UP. SIT DOWN. FIGHT, FIGHT, FIGHT!

12
Practice

• Handout
• Working Together
• On Your Own
• Homework
• Application Problem 2-1

13
Bell Quiz

1. What new accounting device did you learn about?
2. What side is the debit?
3. What side is the credit?
4. What does normal balance mean?
5. What is the normal balance for each of the
   following Assets, Liabilities, Owners Equity?

14
Bell Quiz - Answers

1. T Account
2. Left
3. Right
4. Side the account increases on
5. Debit, Credit, Credit

15
Review

• Creating T Accounts Cheat Sheet
• Go over Homework
• Crossword Puzzle Review

16
Creating a Cheat Sheet

• Using the color paper make the following T
  accounts
• One large one
• Small Assets
• Small Liabilities
• Small Owners Equity
• Follow Teacher Direction

17
22 Analyzing How Transactions Affect Accounts

• Steps to Analyzing a Transaction into Debit and
  Credit Parts
• Which accounts are affected?
• How is each account classified?
• How is each classification changed?
• How is each amount entered in the accounts?

18
Received Cash From Owner

• Received cash from owner as an investment,
  5,000.
• Remember
• Debits must equal credit
• DEBITS CREDITS
• Total Debits Total Credits
• What accounts? - Cash and Capital
• Assets Owners Equity
• Increased, Increased
• Debit, Credit
• A list of accounts used by a business is called a
  chart of accounts..(page 3)

Cash
5,000
5,000
19
Paid Cash for Supplies

• Paid Cash for Supplies, 275
• Cash Supplies
• Asset, Asset
• Decreased, Increased
• Credit, Debit

20
Paid Cash for Insurance

• Paid cash for insurance, 1200.00
• Cash and Insurance
• Asset Asset
• Decrease(Cash) Increase(PP Insurance)
• Credit Cash Debit PP Insurance

21
Bought Supplies on Account

• Bought Supplies on account from Supply Depot,
  500.00
• Supplies A/P Suppy Depot
• Asset Liability
• Increase(Supplies) Increase (A/P)
• Debit Supplies Credit Cash

22
Paid Cash on Account

• Paid Cash on account to Supply Depot, 300.00.
• Cash A/P Supply Depot
• Asset Liability
• Decrease Decrease
• Credit Debit

23
Practice

• Working Together
• On Your Own
• Application 2-2

24
Pass Out Note cards INCREASE

• INCREASE SIDE
• Debit Credit
• A D E L O R
• s r x I . e
• s a p a E v
• e w e b . e
• t I n I n
• n s l u
• g e i e
• t
• y

25
FLIP THE CARD OVER

• DECREASE SIDE
• Debit Credit
• L O R A D E
• I . e s r x
• A E v s a p
• B . e e w e
• I n t i n
• L u n s
• I e g e
• T
• Y

26
Analyzing How Transactions Affect Owners Equity

• Received Cash from Sales, 295
• Revenue increases OE
• Separate account for revenue Sales
• OE has a Credit normal balance
• Therefore, Revenue has a credit normal balance

OE, Capital
Cash
Sales
295
295
27
Sold Services on Account

• Sold services on account to Oakdale School, 350.
• Which accounts are affected?
• Accounts Receivable-Oakdale Schools Sales
• How is each account classified?
• Asset Account Owners Equity
• How is each classification changed?
• Increases Increases
• How is each amount entered in the accounts?
• Debit A/R Credit Sales

A/R Oakdale School
Sales
350
350
28
Paid Cash for an Expense

• Paid cash for Rent, 300
• Expenses decrease OE
• Separate expense accounts are used to summarize
  these decreases
• Rent Expense
• O.E. has normal credit balance
• Therefore, Rent Expense has a normal debit
  balance since it decreases OE

Rent Expense
Cash
300
300
29
Received Cash on Account

• Received cash on account from Oakdale School,
  200.
• Which accounts are affected?
• Cash Accounts Receivable-Oakdale Schools
• How is each account classified?
• Asset Asset
• How is each classification changed?
• Increases Decreases
• How is each amount entered in the accounts?
• Debit Cash A/R Oakdale Schools

A/R Oakdale School
Cash
200
200
30
Paid Cash to Owner for Personal Use

• Paid cash to owner for personal use, 125.
• Withdrawals decrease OE
• Normal Debit balance

• Which accounts are affected?
• Kim Park, Drawing Cash
• How is each account classified?
• O.E. Asset
• How is each classification changed?
• Decreases Decreases
• How is each amount entered in the accounts?
• Debit Kim Park, Drawing Cash

Cash
Kim Park, Drawing
125
125
31
ADELOR vs. LORADE

• SIMPLY stated ADELOR for the POSITIVE/normal
  balance side (and vice versa) LORADE for the
  DECREASE side.
• Make a note card!

32
Practice

• Working Together
• On Your Own
• Application Problem 2-3

33
Group Exercise

• Analyzing T- Account
• Based on the information recorded on your
  t-accounts, Determine the transaction by
  analyzing the way it was recorded.
• Share

34
Individual Review

• Audit your Understanding p. 37 and 44
• Audit Test
• Go over Homework
• Introduce DEAD COIL
• Application Problems 2-4, 2-5, 2-6

35
Review Day Preparing for Test

• In the Life of a Credit Union
• Class Cheer
• Cases and Auditing for Errors
• Study Guide Pairs
• Catch Phrase
• Review Game

36
A Life With A Credit Union Activity

• In your group listen to the following story
• When I say debit pass your pencils to the left!
• When I say credit pass your pencils to the right!

37
Class Cheer

• Debits on the Left
• Credits on the Right
• Stand up, Sit Down
• Fight Fight Fight!

38
Practice/ Assignments

• Cases page 50
• Auditing for errors
• Study Guide Pairs
• Catch Phrase
• Review Game