1. Transactions that Affect Assets, Liabilities, and Owner’s Equity
Chapter 4
Transactions that Affect Assets, Liabilities, and Owner’s Equity

2. Accounts and Double-Entry Accounting
Chapter 4, Section 1
Accounts and Double-Entry Accounting

3. Accounts and Double Entry Accounting System
Ledger
a book or file containing a separate page for each business account
serves as a permanent record of financial transactions
a.k.a “Keeping the Books”

4. Chart of Accounts
list of all accounts and their assigned account numbers
Numbering Accounts:
two or more digits in each number
most common 3 digits
Large companies have more digits because they have more accounts
Turn to page 73 in your textbook
Assets begin with 1
Liabilities begin with 2
Owner’s Equity begins with 3
Revenues begin with 4
Expenses begin with 5

5. Vocab.
Double Entry Accounting: a system of record keeping in which each business transaction affects at least two accounts
Turn to page 74 in your textbook
T Accounts: “T” shape, shows dollar increases and decrease in an account that is caused by a transaction

6. Debits vs. Credits Debits = Credits ALWAYS!
Debit: left side of the T account
Abbreviation = DR
Helpful reminder “Keep it on the DL (Debit Left)
Credit: right side of the T account
Abbreviation CR
Debits = Credits ALWAYS!
Normal Balance: side used to record increases to an account

7. Handout Overhead Need to know the top only right now
Assets
Liabilities
Capital
Label Normal Balance
Do Not Lose, we will need the rest in Chapter 5

8. T Account Rules
Rules for Asset Accounts: 1. Increase on Debit side 2. Decreases on Credit side 3. Normal Balance Side = Debit Transparency 4-2
Rules for Liabilities and Capital: 1. Increase on Credit side 2. Decreases on Debit side 3. Normal Balance Side = Credit Transparency 4-3

9. Applying the Rules of Debit and Credit
Chapter 4, Section 2
Applying the Rules of Debit and Credit

10. Steps to Analyze Business Transactions
Identify accounts affected
Classify the accounts affected
Determine the amount of increase or decrease for each account affected
Which account is debited? For what amount?
Which account is credited? For what amount?
What is the complete entry in T Account form?
Transparency 4-5
Also on page 78 in your textbook

11. Let’s see how those steps work…
Turn to page 79 in your textbook
Business Transactions 1 – 7
Transparencies