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source documents
- -identify and describe transactions and events entering the accounting system
- -Ex. sales receipt, checks, purchase orders, bills
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account
-record of increases and decreases in a specific asset, liability, equity, revenue or expense
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general ledger
-is a record of all accounts used by a company
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assets accounts
- -resources owned or controlled by a company
- -have expected future benefits
- -Ex. cash, accounts receivable, note receivable, and prepaid accounts, supplies, equipment, buildings, land
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liability accounts
- -claims (by creditors) against assets, which means they are obligations to transfer assets or provide products or services to other entities.
- -Ex. accounts payable, notes payable, unearned revenue
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equity accounts
- -The owner’s claim on a company’s assets is called equity or owner’s equity. Equity is the owner’s residual interest in the assets of a business after deducting liabilities.
- -Ex. owner's capital, owner's withdrawals, revenue, expenses
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Equity equation
=Owner's capital - Owner's withdrawals + Revenues - Expenses
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When an owner invests in a company, it increases both ____
assets and equity
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When an owner withdraws assets for personal use, it decreases both ____
company assets and total equity
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Revenues always _____equity
increase
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Expenses always ______equity
decrease
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T-account
- -a ledger account
- -used to show the effects of transactions
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Double Entry Accounting Equation
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To increase assets (debit or credit)?
debit
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To decrease assets (debit or credit)?
credit
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To increase liabilities (debit or credit)?
credit
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To decrease liabilities (debit or credit)?
debit
-
To decrease equity (debit or credit)?
debit
-
To increase equity (debit or credit)?
credit
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Normal balance for Assests
Debit
-
Normal balance for Liabilities
Credit
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Normal balance for Equity
Credit
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Normal balance for Owner, Capital
Credit
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Normal balance for Owner, Withdrawals
Debit
-
Normal balance for Revenues
Credit
-
Normal balance for Expenses
Debit
-
Debt Ratio Formula
=Total Liabilities/Total Assets
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