1. LESSON 2-1 Using T Accounts
4/15/2017
Chapter 2-1
Using T Accounts

2. ANALYZING THE ACCOUNTING EQUATION
page 28
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3. Analyzing Transactions in Debit and Credit Parts
LESSON 2-1
4/15/2017
Analyzing Transactions in Debit and Credit Parts
It is important to distinguish between debit and credit parts.
These two terms will be used throughout the study of accounting.
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4. Accounting Equation Assets = Liabilities + Owner’s Equity
LESSON 2-1
4/15/2017
Accounting Equation
Assets = Liabilities + Owner’s Equity
Left Side Right Side
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5. New Vocabulary: T-account
LESSON 2-1
4/15/2017
New Vocabulary: T-account
An accounting device used to analyze transactions.
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6. Debit An amount recorded on the left side of a T account. Left Side
LESSON 2-1
4/15/2017
Debit
An amount recorded on the left side of a T account.
Left Side
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7. Credit An amount recorded on the right side of a T account. Right Side
LESSON 2-1
4/15/2017
Credit
An amount recorded on the right side of a T account.
Right Side
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8. Normal Balance The side of the account that is increased. 2-1
LESSON 2-1
4/15/2017
Normal Balance
The side of the account that is increased.
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9. Using T Accounts T account Assets = Liabilities + Owner’s Equity
LESSON 2-1
4/15/2017
Using T Accounts
Assets = Liabilities + Owner’s Equity
Left Side Right Side
Debit Side Credit Side
T account
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10. Account Balances Assets = Liabilities + Owner’s Equity Any Asset
LESSON 2-1
4/15/2017
Account Balances
Assets = Liabilities + Owner’s Equity
Any Asset
Debit Credit
Normal Bal.
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11. Account Balances Assets = Liabilities + Owner’s Equity Any Liability
LESSON 2-1
4/15/2017
Account Balances
Assets = Liabilities Owner’s Equity
Any Liability
Debit Credit
Normal Balance
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12. Account Balances Assets = Liabilities + Owner’s Equity Debit Credit
LESSON 2-1
4/15/2017
Account Balances
Assets = Liabilities + Owner’s Equity
Owner’s Capital Account
Debit Credit
Normal Bal.
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13. Account Balances Assets = Liabilities + Owner’s Equity
LESSON 2-1
4/15/2017
Account Balances
Assets = Liabilities + Owner’s Equity
Any Asset Any Liability
Debit Credit Debit Credit
Normal Bal Normal Balance
Owner’s Capital Account
Debit Credit
Normal Bal.
Remember: An equation must always have equal amounts on each side.
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14. Increases and Decreases
LESSON 2-1
4/15/2017
Increases and Decreases
Assets = Liabilities Owner’s Equity
Any Asset Any Liability
Debit Credit Debit Credit
Normal Bal Normal Balance
Owner’s Capital Account
Debit Credit
Normal Bal.
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15. Increases and Decreases
LESSON 2-1
4/15/2017
Increases and Decreases
Remember:
The two sides of an account are used to record increases and decreases to that account.
Some accounts increase on the debit side
Some accounts increase on the credit side.
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16. Increases and Decreases
LESSON 2-1
4/15/2017
Increases and Decreases
The easy way to remember the increase side of each account is to connect it with the normal balance side of the account.
The decrease side is the opposite side.
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17. Draw a T account for Assets
LESSON 2-1
4/15/2017
Draw a T account for Assets
Please add the increase arrow.
Assets
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18. Draw a T account for Assets
LESSON 2-1
4/15/2017
Draw a T account for Assets
How did you do?
Assets
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19. Draw a T account for Liabilities
LESSON 2-1
4/15/2017
Draw a T account for Liabilities
Please add the increase arrow.
Liabilities
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20. Draw a T account for Liabilities
LESSON 2-1
4/15/2017
Draw a T account for Liabilities
How did you do?
Liabilities
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21. Draw a T account for Owner’s Equity
LESSON 2-1
4/15/2017
Draw a T account for Owner’s Equity
Please add the increase arrow.
Capital
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22. Draw a T account for Owner’s Equity
LESSON 2-1
4/15/2017
Draw a T account for Owner’s Equity
How did you do?
Capital
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23. Which is the Normal Balance Side?
LESSON 2-1
4/15/2017
Which is the Normal Balance Side?
Assets?
Left Side (Debit Side)
Liabilities?
Right Side (Credit Side)
Owner’s Equity?
Right Side (Credit side)
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24. ACCOUNTS--Review
page 29
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25. ACCOUNT BALANCES--Review
page 29
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26. Work Together 2-1
On my webpage
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27. Chapter 2-2 Analyzing How Transactions Affect Accounts
LESSON 2-1
4/15/2017
Chapter 2-2 Analyzing How Transactions Affect Accounts
Each transaction affects the balances of at least two accounts.
Chart of Accounts: A list of accounts used by a business.
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28. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Assets = Liabilities + Owner’s Equity
Cash Any Liability
Debit Credit Debit Credit
Normal Bal Normal Balance
Owner’s Capital Account
Debit Credit
Normal Bal.
Remember: An equation must always have equal amounts on each side.
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29. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Received $1,000 cash from owner, Kyle June, as an investment.
Consider:
1. Which accounts are affected?
2. How is each account classified?
3. How is each classification changed?
4. How is each amount entered in the accounts?
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30. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Received $5,000 cash from owner as an investment.
Assets = Liabilities + Owner’s Equity
Cash Kyle June, Capital
Debit Credit Debit Credit
N. Bal Normal Balance
$5, $5,000
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31. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Paid cash for supplies, $
Assets = L + OE
Cash Supplies
Debit Credit Debit Credit
N. Bal N. Bal
$ $275.00
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32. Analyzing Transactions -- Use the four questions.
LESSON 2-1
4/15/2017
Analyzing Transactions -- Use the four questions.
Paid $1,200 for insurance.
Assets = L + OE
Cash Prepaid Ins.
Debit Credit Debit Credit
N. Bal N. Bal
1, ,200.00
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33. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Bought supplies on account from Stutzman Music. $
Assets = Liabilities Owner’s Equity
Supplies A.P. - Stutzman Music
Debit Credit Debit Credit
N. Bal Normal Bal.
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34. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Paid $ on account to Stutzman Music.
Assets = Liabilities + Owner’s Equity
Cash A.P. - Stutzman Music
Debit Credit Debit Credit
N. Bal Normal Bal.
Remember the increase and decrease side of each account can be related back to the accounting equation.
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35. RECEIVED CASH FROM OWNER AS AN INVESTMENT
page 32
August 1. Received cash from owner as an investment, $5,
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36. PAID CASH FOR SUPPLIES August 3. Paid cash for supplies, $275.00.
page 33
August 3. Paid cash for supplies, $
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37. PAID CASH FOR INSURANCE
page 34
August 4. Paid cash for insurance, $1,
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38. BOUGHT SUPPLIES ON ACCOUNT
page 35
August 7. Bought supplies on account from Supply Depot, $
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39. PAID CASH ON ACCOUNT
page 36
August 11. Paid cash on account to Supply Depot, $
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40. Audit Your Understanding
Which two accounts are affected when a business pays cash for supplies?
Cash
Supplies
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41. Work Together 2-2
On My Website
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42. LESSON 2-1 Analyzing How Transactions Affect Owner’s Equity Accounts
Chapter 2-3
4/15/2017
Analyzing How Transactions
Affect Owner’s Equity Accounts

43. RECEIVED CASH FROM SALES
page 38
August 12. Received cash from sales, $
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44. SOLD SERVICES ON ACCOUNT
page 39
August 12. Sold services on account to Oakdale School, $
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45. Analyzing Transactions 2-3
LESSON 2-1
4/15/2017
Analyzing Transactions 2-3
Received cash from sales, $400.00
Revenue makes Owner’s Equity increase.
Assets = Liabilities Owner’s Equity
Cash Sales
Debit Credit Debit Credit
N. Bal Normal Bal.
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46. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Sold services on account to Kids Time, $500.00
Assets = Liabilities + Owner’s Equity
A.R. Kids Time Sales
Debit Credit Debit Credit
N. Bal Normal Bal.
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47. Analyzing Transactions --Use the four questions.
LESSON 2-1
4/15/2017
Analyzing Transactions --Use the four questions.
Received cash on account from Kids Time, $100.00
Assets = L + OE
Cash A.R. Kids Time
Debit Credit Debit Credit
N. Bal N. Bal
$ $100.00
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48. Analyzing Expense Transactions
LESSON 2-1
4/15/2017
Analyzing Expense Transactions
Expenses decrease owner’s equity.
The decreases from expenses could be recorded directly in the Owner’s Equity account.
But, the OE account would have too many entries.
Using separate accounts for each helps to keep information straight.
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49. Analyzing Expense Transactions
LESSON 2-1
4/15/2017
Analyzing Expense Transactions
The owner’s capital account has a normal credit balance.
Decreases in the owner’s capital account are shown as debits.
Therefore, an expense account has a normal debit balance.
Expenses are always debited.
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50. PAID CASH FOR AN EXPENSE
page 40
August 12. Paid cash for rent, $
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51. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Paid cash for rent, $
Expenses decrease Owner’s Equity--so an expense account’s normal balance side is the left side.
Assets = Liabilities + Owner’s Equity
Cash Rent Expense
Debit Credit Debit Credit
N. Bal Normal Bal.
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52. Owner’s Taxable Income
LESSON 2-1
4/15/2017
Owner’s Taxable Income
A business owned by one person is called a proprietorship.
The IRS does not require the proprietorship, itself, to pay taxes.
However, the owner must include the net income of the proprietorship in his or her own taxable income.
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53. LESSON 2-1
4/15/2017
Owner Withdrawals
Employee salaries are considered an expense that reduces the net income of a company.
Owner withdrawals are not considered an expense.
Withdrawals do not affect the business’s income.
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54. PAID CASH TO OWNER FOR PERSONAL USE
page 42
August 12. Paid cash to owner for personal use, $
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55. Analyzing Transactions
LESSON 2-1
4/15/2017
Analyzing Transactions
Paid cash to owner for personal use,
Withdrawals decrease Owner’s Equity--so a drawing account’s normal balance is the left side.
Assets = Liab. + Owner’s Equity
Cash Taylor Stalter, Drawing
Debit Credit Debit Credit
N. Bal Normal Bal.
Withdrawals could be recorded directly in the owner’s capital account. Using a separate Drawing account helps keep information separate.
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56. Audit Your Understanding
What two accounts are affected when a business receives cash from sales?
Cash and Sales
What two accounts are affected when services are sold on account.
Sales and Accounts Receivable
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57. Audit Your Understanding
What two accounts are affected when a business pays cash to the owner for personal use?
Owner’s drawing account and Cash
Are revenue accounts increased on the debit side or credit side? Explain why.
Credit side because sales increase owner’s equity
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58. Audit Your Understanding
Are expense accounts increased on the debit side or credit side. Explain why.
Debit side because expenses decrease owner’s equity.
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59. Work Together, 3-3
On My Website
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