1. Week 2

2.  Lots of transactions occur which affect
different accounts.
 The business needs to keep track of the
different accounts it is accounting for so it
creates a CHART of ACCOUNTS.
 The chart of accounts is a numbered list of all
the businesses accounts.
 The chart of accounts allows accounts to be
located quickly.
 Chart of accounts can change.

3.  Each account in the chart of accounts will
have an account number.
 Accounts in the chart of accounts are
generally grouped according to account
classification: assets, liabilities, owner’s
equity, revenue, expense, etc.
◦ Cash 110
◦ Accounts Payable 215
◦ Owner’s Capital 305
◦ Sales 420
◦ Utilities Expense 560

4.  Form used to analyze transactions and how
account balances are changed.

5.  Left and right side of T account and named.
Left is DEBIT, right is CREDIT.

6. Accounts have a normal balance of either a
debit or a credit (but not both).
An entry on the side of an account’s normal
balance will increase the account.
An entry on the opposite side of an account’s
normal balance will decrease the account.

7.  Recall the $$$ amount in an account is
known as the account balance. Each account
has a normal balance. Normal balance refers
to the side that is INCREASED.
 Assets have a normal debit balance. A good
way to remember this is assets are on the left
side of the accounting equation and on the
left side of the T account or the debit side.

8.  Liabilities and Owner’s Equity have a normal
credit balance. A good way to remember this
is liabilities and owner’s equity are on the
right side of the accounting equation and on
the right side of the T account or the credit
side.

9. Assets = Liabilities + Owner’s Equity
Debits
Increase
Credits
Decrease
Normal
Balance
Debits
Decrease
Credits
Increase
Normal
Balance
Debits
Decrease
Credits
Increase
Normal
Balance
“Capital”

10. Withdrawals Expenses Revenues
Debits
Increase
Credits
Decrease
Normal
Balance
Debits
Increase
Credits
Decrease
Normal
Balance
Debits
Decrease
Credits
Increase
Normal
Balance
Negative Components of
Owner’s Equity
Positive Component
Of
Owner’s Equity
Remember that the normal balance of owner’s equity is a credit.
“Sales”

11. DEAD COIL
 Debit - Expenses Assets Drawing
 Credit - Owner's Equity Income Liabilities
◦ Income = revenue from sales
Debit is the normal balance (increasing) side for
assets, expenses and drawing (withdrawal) accounts
while credit is the normal balance (increasing) side
for liabilities, owner's equity (capital) and income
(revenue or sales) accounts. Whenever you're not
sure think DEAD COIL.

12. Questions?
Contact your
instructor