College

Accounting

Heintz & Parry20th Edition

The Double-Entry

Framework

3Chapter

1

Define the parts of a T

account.

Debit Credit

SHAPED

LIKE a “T”

Debit Credit

Debit means

Left

Credit means

Right

Dr. Cr.Abbreviation

for Debit

Abbreviation

for Credit

Dr. Cr.

CASH

Account Name

• Every T account has an increase side and a

decrease side

• Some accounts increase on the debit side and

some accounts increase on the credit side

2

Foot and balance

a T account.

STEP #2: Find the balance by

finding the difference between the

debit and credit totals.

$3,500 debit footing

– 3,130 credit footing

$ 370 balance

CASH

2,000500570430

3,500

FOOTING

1,200300200

5080

200300650150

3,130

FOOTING

STEP #1 FOOT

THE DEBIT AND

CREDIT SIDES

To “Foot” means

to Total

CASH

2,000500570430

3,500

1,200300200

5080

200300650150

3,130370

BALANCE

The balance

is written on

the side with

the larger

total.

3

Describe the effects of

debits and credits on

specific types of

accounts.

ASSET ACCOUNTS

Dr. Cr.

+

Increase on

the debit side

Decrease on

the credit side

–

In every transaction, debits must

equal credits.

LIABILITY ACCOUNTS

Dr. Cr.

+

Decrease on

the debit side

Increase on

the credit side

–

CAPITAL ACCOUNT

Dr. Cr.

+

Decrease on

the debit side

Increase on

the credit side

JUST LIKE LIABILITY

ACCOUNTS

–

DRAWING ACCOUNT

Dr. Cr.

+

Increase on the

debit side

Decrease on the

credit side

JUST LIKE

ASSET ACCOUNTS

–

REVENUE ACCOUNTS

Dr. Cr.Decrease on

the debit side

Increase on

the credit side

JUST LIKE LIABILITY AND

CAPITAL ACCOUNTS

+–

EXPENSE ACCOUNTS

Dr. Cr.Increase on the

debit side

Decrease on the

credit side

JUST LIKE ASSET

ACCOUNTS

+ –

4

Use T accounts to

analyze transactions.

Purchased office supplies for $800 cash.

Identify the accounts that are

affected.

CASHOFFICE

SUPPLIES

Classify these accounts as assets,

liabilities, owner’s equity, revenues, or

expenses.

CASHOFFICE

SUPPLIES

Identify the location of the accounts

in the accounting equation and/or

the owner’s equity umbrella—left or

right.

CASH

DR. CR.

+

OFFICE SUPPLIES

DR. CR.

+– –

Did Office Supplies

increase or decrease in

this transaction?

INCREASED

OFFICE SUPPLIES

DR. CR.

800+ –

Did Cash increase or

decrease in this

transaction?

DECREASED

CASH

DR. CR.

800+ –

DR.

CASH

+800

CR.

OFFICE SUPPLIESDR. CR.

800+– –

Purchased equipment on

account for $3,000.

Identify the accounts that are

affected.

EQUIPMENTACCOUNTS

PAYABLE

Classify these accounts as assets,

liabilities, owner’s equity, revenues, or

expenses.

EQUIPMENT

ACCOUNTS

PAYABLE

Identify the location of the accounts

in the accounting equation and/or

the owner’s equity umbrella—left or

right.

EQUIPMENT

DR. CR.

+

ACCOUNTS PAYABLE

DR. CR.

+– –

Did Equipment increase

or decrease in this

transaction?

INCREASED

EQUIPMENT

DR. CR.

3,000+ –

Did Accounts Payable

increase or decrease in

this transaction?

INCREASED

ACCOUNTS PAYABLE

DR. CR.

3,000

+–

DR.

ACCOUNTS PAYABLE

+3,000

CR.

EQUIPMENTDR. CR.

3,000+– –

Mary Adams, the

owner, invested

$25,000 in the

business.

Identify the accounts that are affected and

classify these accounts as assets, liabilities,

owner’s equity, revenues, or expenses.

M. ADAMS, CAPITAL CASH

DR. CR. DR. CR.

OWNER’S EQUITY ASSET

Identify the location of the accounts

in the accounting equation and/or

the owner’s equity umbrella—left or

right.

CASH

DR. CR.

+

M. ADAMS, CAPITAL

DR. CR.

+– –

CASH

DR. CR.

+

M. ADAMS, CAPITAL

DR. CR.

+

INCREASED INCREASED

25,000 25,000

– –

DR.

M. ADAMS, CAPITAL

+25,000

CR.

CASHDR. CR.

+25,000

– –

Mary withdrew

$1,500 for

personal

expenses.

Identify the accounts that are affected and

classify these accounts as assets, liabilities,

owner’s equity, revenues, or expenses.

M. ADAMS, DRAWING CASH

DR. CR. DR. CR.

OWNER’S EQUITY ASSET

Identify the location of the accounts in

the accounting equation and/or the

owner’s equity umbrella—left or right.

CASH

DR. CR.

+

M. ADAMS, DRAWING

DR. CR.

+– –

CASH

DR. CR.

+

M. ADAMS, DRAWING

DR. CR.

INCREASED DECREASED

1,500 1,500+– –

DR.

M. ADAMS, DRAWING

1,500

CR.

CASHDR. CR.

1,500+ +– –

Mary performed services and

received $4,500 in cash.

Identify the accounts that are affected and

classify these accounts as assets, liabilities,

owner’s equity, revenues, or expenses.

CONSULTING FEES CASH

DR. CR. DR. CR.

REVENUE ASSET

Identify the location of the accounts

in the accounting equation and/or

the owner’s equity umbrella—left or

right.

CASH

DR. CR.

CONSULTING FEES

DR. CR.

+ +– –

CASH

DR. CR.

CONSULTING FEES

DR. CR.

INCREASED INCREASED

4,500 4,500

+ +– –

DR.

CONSULTING FEES

4,500

CR.

CASHDR. CR.

4,500+ +– –

Mary performed

$6,000 of services

on account.

DR.

CONSULTING FEES

6,000

CR.

ACCOUNTS

RECEIVABLEDR. CR.

6,000

ACCOUNTS

RECEIVABLE

INSTEAD OF CASH

+ +– –

Mary Adams paid her assistant

$750 in wages.

Identify the accounts that are affected and

classify these accounts as assets, liabilities,

owner’s equity, revenues, or expenses.

WAGES EXPENSE CASH

DR. CR. DR. CR.

EXPENSE ASSET

Identify the location of the accounts in

the accounting equation and/or the

owner’s equity umbrella—left or right.

CASH

DR. CR.

WAGES EXPENSE

DR. CR.

+ +– –

CASH

DR. CR.

WAGES EXPENSE

DR. CR.

INCREASED DECREASED

750 750+ +– –

DR.

CASH

750

CR.

WAGES EXPENSE

DR. CR.

750+ +– –

5

Prepare a trial balance

and explain and

explain its purposes

and linkages with the

financial statements.

• A listing of all accounts and their balances

• A totaling of debits and credits

• Is proof that debits equal credits and that the

accounting equation has remained in balance

• Used as an aid in preparing financial statements

Account Title Debit Balance Credit Balance

HEADING should include:

•Name of the company

•Title of the document—“Trial Balance”

•Date of the trial balance

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

370 00

650 00

200 00

3,600 00

80 00

All asset accounts are

listed first

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

370 00

650 00

200 00

3,600 00

1,800 00

Liabilities are

shown next

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

Jessica Jane, Capital

Jessica Jane, Drawing

370 00

650 00

200 00

3,600 00

1,800 00

2,000 00

80 00

150 00

Now the owner’s equity

accounts

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

Jessica Jane, Capital

Jessica Jane, Drawing

Delivery Fees

370 00

650 00

200 00

3,600 00

1,800 00

2,000 00

80 00

150 00

2,150 00

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

Jessica Jane, Capital

Jessica Jane, Drawing

Delivery Fees

Rent Expense

Telephone Expense

Wages Expense

370 00

650 00

200 00

3,600 00

1,800 00

2,000 00

80 00

150 00

2,150 00

200 00

50 00

650 00

Account Title Debit Balance Credit Balance

Cash

Accounts Receivable

Supplies

Prepaid Insurance

Delivery Equipment

Accounts Payable

Jessica Jane, Capital

Jessica Jane, Drawing

Delivery Fees

Rent Expense

Telephone Expense

Wages Expense

370 00

650 00

200 00

3,600 00

1,800 00

2,000 00

80 00

150 00

2,150 00

200 00

50 00

650 00

5,950 00 5,950 00

It balances!!!

Debits = Credits