Analyzing business transactions through debit and credit 06272013

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  • 1. 27 June 2013
  • 2.  Analyzing business transactions would involve a dual effect in any of the elements of the accounting equation.  These dual effects would be analyzed and recorded in terms of debit and credit.
  • 3.  Account – a detailed record of the changes that have occurred in a particular asset, liability or owner’s equity during a period of time.  Consists of three parts:  The title of the account  Left or debit side  Right or credit side
  • 4.  T-Account – a simplified format of account that resembles the letter T.  The vertical line in the letter divides the account into its left and  right sides. The account title rests on the horizontal line. DEBIT CREDIT left side right side Title of account
  • 5.  Debit  Indicates left  Abbreviated as Dr  Came from the Latin word debere which originally meant ‘debtor’  Credit  Indicates right  Abbreviated as Cr  Came from the Latin word credere which originally meant ‘creditor’
  • 6. ASSETS = LIABILITIES + OWNER’S EQUITY Left or debit side ASSETS Right or credit side LIABILITIES AND OWNER'S EQUITY (REVENUE - EXPENSE) Debit balance Credit balance Title of account
  • 7.  This pattern of recording debits and credits is based on the accounting equations: Rules of Debit and Credit = + Debit Credit Debit Credit Debit Credit for for for for for for Increase Decrease Decrease Increase Decrease Increase ASSETS LIABILITIES OWNER'S EQUITY
  • 8.  Franco Diaz invested P100,000 cash to begin his accounting business.  The business purchased office supplies on account for P5,000.  The business paid one year rental for its office space, P24,000.  The business paid ½ of the amount owed in buying office supplies.