1. Review: What is the left side of the Accounting Equation called? Assets What is the right side of the Accounting Equation called? Equities: Liabilities and Owner’s Equity What is “An accounting device used to analyze transactions and how accounting balances are changed?” T Account 1 LESSON 2-2

2. Review Continued The amount always recorded on the left side of a T Account? Debit The amount always recorded on the right side of a T account? Credit The side of the T account that is always increased is called? Normal Balance 2 LESSON 2-2

3. Review Continued The normal balance is found on what side of a T Account? The same side as the corresponding Accounting Equation. The normal side of an asset, such as supplies? Debit side (left side). The normal side of a Liability or Owner’s equity? Credit side (right side). Does the normal balance side always increase or decrease? Increase 3 LESSON 2-2

4. Analyzing How Transactions Affect Accounts

5. Rules of recording Transactions: Must change the balances of at least two accounts One must be a debit; one must be a credit Total Debits must = total credits for each transaction “Chart of Accounts” A list of accounts used by a business 5 LESSON 2-2

6. Chart of Accounts 6 Balance Sheet Accounts: (100) Assets 110Cash 120Petty Cash 130Accounts Receivable _Oakdale School 140Accounts Receivable – Campus Internet Cafe 150Supplies 160Prepaid Insurance (200)Liabilities: 210Accounts Payable – Supply Depot 220Accounts Payable – Thomas Supply Company (300)Owner’s Equity 310Kim Park, Capital 320Kim Park, Drawing 330Income Summary Income Statement Accounts: (400)Operating Revenue 410Sales (500)Expenses 510Advertising Expenses 520Insurance Expense 530Miscellaneous Expense 540Rent Expense 550Supplies Expense 560Utilities Expense

7. Analyzing a Transaction Four Questions to Analyze a Transaction: Which two accounts are changed? How is each classified? (asset, liability, owners equity) How is each changed? (increase or decrease) How is each entered in the accounts? (on debit or credit side)? 7 LESSON 2-2

8. 8 RECEIVED CASH FROM OWNER AS AN INVESTMENT 2. How is each account classified? 3. How is each changed? Label the Normal Balance 4. How is each amount entered into the accounts? August 1. Received cash from owner as an investment, $5,000.00. page 32 1. Which accounts are affected? Cash & Capital Cash = A & Capital = E Cash = increases & Capital = Increases Cash = Debit & Capital = Credit

9. 9 RECEIVED CASH FROM OWNER AS AN INVESTMENT August 1. Did we do it right? Received cash from owner as an investment, $5,000.00. page 32

10. 10 PAID CASH FOR SUPPLIES August 3. Paid cash for supplies, $275.00. 2. How is each account classified? 3. How is each changed? Label the normal balance 4. How is each amount entered in the accounts? page 33 1. Which accounts are changed? Cash & Supplies Cash = Credit & Supplies = Debit Cash = A & Supplies = A Cash = decreases & Supplies = Increase

11. 11 PAID CASH FOR SUPPLIES August 3. Did we do it right? Paid cash for supplies, $275.00. page 33

12. 12 PAID CASH FOR SUPPLIES August 3. Paid cash for Insurance, $1200.00. page 33 2. How is each account classified? 3. Where is the normal balance and how is each changed? Label the normal balance 4. How is each amount entered in the accounts? Cash & Prepaid Insurance 1. Which accounts are affected? Cash = decreases & Prepaid = Increases Cash = Credit & Prepaid Ins. = Debit Cash = A & Prepaid Ins. = A

13. 13 LESSON 2-2 PAID CASH FOR INSURANCE August 4. Did we do it right? Paid cash for insurance, $1,200.00. page 34

14. 14 BOUGHT SUPPLIES ON ACCOUNT August 7. Bought supplies on account from Supply Depot, $500.00. 4. How is each amount entered in the accounts? 33 1. Which accounts are changed? 2. How is each account classified? 3. Where is the normal balance and how is each changed? Label the normal balance: Supplies & AP Supply Depot Supplies = increase & Acct. Pay. = Increases Supplies = Debit & Acct. Pay = Credit Supplies = A & Acct. Pay. = L

15. 15 BOUGHT SUPPLIES ON ACCOUNT August 7. Did we do it right? Bought supplies on account from Supply Depot, $500.00.

16. PAID CASH ON ACCOUNT August 11. Paid cash on account to Supply Depot, $300.00. 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? Where is the normal balance? 4. How is each amount entered in the accounts? Cash & AP Supply Depot Cash = decreases & Acct. Pay. = decreases Cash = credit & Acct. Pay = debit Cash = A & Acct. Pay. = L

17. 17 PAID CASH ON ACCOUNT August 11. Did we do it right? Paid cash on account to Supply Depot, $300.00.

18. 18 TERM REVIEW chart of accounts

19. Work Together 2-2, Page 23