1. Analyzing Transactions into Debit and Credit Parts
Chapter 2

2. Today’s 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: Read about AAA
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
Assets = Liabilities Owner’s 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
Owner’s 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 Owner’s Equity Debit Credit Debit
Normal Balance
Normal Balance
Normal Balance

11. LET’S 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 What new accounting device did you learn about?
What side is the debit?
What side is the credit?
What does normal balance mean?
What is the normal balance for each of the following: Assets, Liabilities, & Owner’s Equity?

14. Bell Quiz - Answers T – Account Left Right
Side the account increases on
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 Owner’s Equity
Follow Teacher Direction

17. 2:2 – 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 & Owner’s Equity
Increased, Increased
Debit, Credit
A list of accounts used by a business is called a chart of accounts…..(page 3)
Cash OE
$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
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 L O R A D E DECREASE SIDE I . e s r x A E v s a p
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 Owner’s 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 Owner’s 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
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. ADE=LOR vs. LOR=ADE
SIMPLY stated: ADE=LOR for the POSITIVE/normal balance side (and vice versa); LOR=ADE 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 Share
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. Debits on the Left Credits on the Right Stand up, Sit Down
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