LESSON

2-1

Using T Accounts

WHAT IS THE ACCOUNTING EQUATION

List 3 Accounting Concepts

• Business Entity

• Unit of Measurement

• Realization of Revenue

What are 3 Accounting Concepts

• Business Entity– Financial information is recorded and reported

separately from the owner’s personal financial information

• Unit of Measurement– Business transactions are stated in numbers that

have common values – that is, using a common unit of measurement.

• Realization of Revenue– Revenue is Recorded at the time goods or

services are sold

Classifications

• Accounts Receivable– ASSET

• Sales– REVENUE

• Accounts Payable– LIABILITY

• Rent Expense– EXPENSE

• Prepaid Insurance– ASSET

• Drawing– OWNER’S EQUITY

• Utilities Expense– EXPENSE

• Cash– ASSET

• Capital– OWNER’S EQUITY

• Advertising Expense– EXPENSE

• Supplies– ASSET

Classifications

•Accounts Receivable– ASSET

•Sales– REVENUE

•Accounts Payable– LIABILITY

•Rent Expense– EXPENSE

•Prepaid Insurance– ASSET

•Drawing– OWNER’S EQUITY

•Utilities Expense– EXPENSE

•Cash– ASSET

•Capital– OWNER’S EQUITY

•Advertising Expense– EXPENSE

•Supplies– ASSET

Big T

Asset = Liabilities + Owner’s Equity

Left Side Right Side

Little T Account

CASH or AP or CAPITAL or SALES

Left Side Right SideDebit Side Credit Side

Little T Account

CASH

When a company receives money what

do they do with it

When a company pays out money, how do they do it

Make a Deposit Write a Check

Debit Credit

Normal Balance

Asset = Liabilities + Owner’s Equity

Any Asset Any Liability Any OE

Left Side Right Side

Debit Credit Debit Credit Debit Credit

Normal Balance

Normal Balance

Normal Balance

Increase / Decrease

Asset = Liabilities + Owner’s Equity

Any Asset Any Liability Any OE

Left Side Right Side

Debit Credit Debit Credit Debit Credit

Normal Balance

Normal Balance

Normal Balance

Incr

ea

se

De

crea

se

Incr

ea

se

De

crea

se

Incr

ea

se

De

crea

se

Cash Supplies

Kim Park, Capital

AR –Oakdale School

Prepaid Insurance AP – Supply Depot

Debit Credit Debit Credit Debit CreditNormal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

e

Debit Credit Debit Credit Debit CreditNormal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

ASSET ASSET ASSET

ASSET LIABILITY OWNER’S EQUITY

Work Together 2-1

Workbook page 21

Textbook page 31

Cash

AR – Christine Kelly

Jeff Dixon, Capital

AP – Miller Supplies

AP – Wayne Office Supplies

Supplies

Debit Credit Debit Credit

Debit Credit

Normal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

eDebit Credit

Debit Credit Debit Credit

Normal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

ePrepaid Insurance

Debit CreditNormal Balance

Incr

ease

Dec

reas

e

ASSET

ASSET

ASSETASSET

LIABILITY

LIABILITY

OWNER’S EQUITY

Class Work

On Your Own 2-1

Cash

AR – Lee McCann

Vickie Monson, Capital

Prepaid Insurance

AP – Topline Supplies

AR – Sonya Lopez

Debit Credit Debit Credit

Debit Credit

Normal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

eDebit Credit

Debit Credit Debit Credit

Normal Balance

Normal Balance

Normal Balance

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

e

Incr

ease

Dec

reas

eSupplies

Debit CreditNormal Balance

Incr

ease

Dec

reas

e

ASSET

ASSET

ASSETASSET

ASSET

LIABILITY

OWNER’S EQUITY

Homework

Application 2-1

TERMS REVIEW

• T account

• debit

• credit

• normal balance