This course covers the complete accounting cycle and is designed for those who are interested in working in the areas of bookkeeping, clerical accounting, finance or general office work or are looking to review their accounting knowledge.Our accounting course teaches principles of accounting, which are consistent across the globe. Even though there may be minor differences in accounting principles in different countries, the core accounting principles are the same.

1. Welcome Dear Students
Your “Account Double – any Trouble”

2. Video Accounting course
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3. Lesson 5: Learning Objectives
1 Permanent Accounts and Temporary Accounts
Applying the Rules of Debit and Credit for
2
Revenue, Expense and Withdrawals
Accounts
3 Business Transaction Analysis

4. Lesson 5 : What You'll learn
WHAT IT IS IMPORTANT WHAT IS NEEDED
UNDERSTAND
Explain the difference Use the six-step method to
between permanent accounts analyze transactions affecting
and temporary accounts. revenue, expense, and
withdrawals accounts.
List and apply the rules of
debit and credit for revenue, Temporary accounts show
expense, and withdrawals the changes in owner’s equity
accounts. during each accounting
period.

5. Key Terms
 permanent accounts
 revenue recognition
 temporary accounts

6. Summary: What Are Revenue ?
Income earned from the sale of goods or
services is called revenue.
Examples of revenue are fees earned for
services performed and cash received
from the sale of merchandise.
Revenue increases owner’s equity
because it increases the assets of the
business.

7. Summary: What Are Expenses ?
To generate revenue most businesses must also
incur expenses to buy goods, materials, and
services. An expense is the cost of products or
services used to operate a business.
Examples of business expenses are
• rent,
• utilities, and
• advertising.
Expenses decrease owner’s equity because they
decrease the assets of the business or increase
liabilities.

8. Summary :The effects of revenue and expenses are
summarized as follows:
• Revenue increases assets and increases owner’s equity.
• Expenses decrease assets and decrease owner’s equity or increase liabilities and
decrease owner’s equity.
.

9. Summary : What Is a Withdrawal ?
If a business earns revenue, the owner will take cash or
other assets from the business for personal use.
This transaction is called a withdrawal, Withdrawals and
investments have opposite effects.
A withdrawal decreases both assets and owner’s equity.
A withdrawal is not the same as an expense.
.

10. The accounts used by a business can be
separated into :
Permanent accounts Temporary accounts
Permanent accounts carry Temporary accounts accumulate
balances forward from one dollar amounts for only one
accounting period to the next. accounting period and then start
The following types of accounts each new accounting period
are permanent accounts: with a zero balance.
• assets The following types of accounts
are temporary accounts:
• liabilities
• revenue
• owner’s capital • expenses
• owner’s withdrawals

11. The temporary accounts are
At the end of that period, the transferred
balances in the temporary
accounts are transferred to the
owner’s capital account.
Remember, expenses decrease
owner’s capital.
Revenue increases owner’s capital

12. The Rules for Revenue Accounts
Rule 1: A revenue account is
increased (+) on the credit side.
Rule 2: A revenue account is
decreased (-) on the debit side.
Rule 3: The normal balance for a
revenue account is the increase
side, or the credit side.
Revenue accounts normally have
credit balances.
Revenue earned from selling
goods or services increases
owner’s capital.

13. The Rule for Revenue Recognition
Following the GAAP principle
of revenue recognition , revenue
is recorded on the date earned,
even if cash has not been
received.

14. The Rules for Expense Accounts
Rule 1: An expense account is
increased on the debit side.
Rule 2: An expense account is
decreased on the credit side.
Rule 3: The normal balance for an
expense account is the increase side,
or the debit side.
Expense accounts normally have
debit balances.
Expenses decrease owner’s
capital.

15. The Rules for the Withdrawals Account
Rule 1: The withdrawals account is
increased on the debit side.
Rule 2: The withdrawals account is
decreased on the credit side.
Rule 3: The normal balance for the
withdrawals account is the increase
side or debit side.
Withdrawals, like expenses,
decrease capital, so the rules of
debit and credit are the same as
for expense accounts.

16. Summary : Rules of Debit and Credit,
Normal Balances of Accounts

17. Summary:
Business transactions between - Balance Sheet
and Income Statement
There are four main types of
transactions between Balance and
Income Statement to be remembered:
1. - Assets + Expenses (Withdrawals)
2. + Liabilities + Expenses
3. + Assets + Revenue
4. - Liabilities + Revenue

18. Summary: 4.
Complete
BUSINESS TRANSACTION ANALYSIS entry in
T-account
 Identify and Classify the
accounts affected
3.
 Determine the amount of 1. Determine
Identify accounts -
increase or decrease for and
each account affected debited
Classify
credited
accounts
 Determine which account
is debited and credited .
For what amount ?
2.
 Complete entry in T-account Determine
accounts -
increase
decrease

19. Follow next Lesson
Thank you ! Lesson 6:
Enroll on full version Recording transactions in a
General Journal
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lecturer's explanation
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