Debit Credit Drill

7/30/2019 Debit Credit Drill

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PowerPoint Presentation by

Matt HartungTeacherTulelake High School

Copyright 2007 Thomson South-Western, a partof The Thomson Corporation. Thomson, the Star

Logo, and South-Western are trademarks used

herein under license.

ACCOUNTING

Rules of debits and

credits


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LEARNING GOALS

1Identify and apply therules of debit and

credit.


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THE T ACCOUNT

LG 3

Left side

Debit

Dr.

Right side

Credit

Cr,

Title

The T account is used as a simple model

to demonstrate recording of transaction information.


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RULES OF DEBIT & CREDIT

All accounts have an

increase side and a

Decrease side.

LG 3

Assets Liabilities Stk-holders Ety.

Dr. Dr. Dr.Cr. Cr. Cr.


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All accounts have a NORMAL BALANCE

The Normal Balance is on the increase side.

LG 3


Dr.

+

Dr.

-

Dr.

-

Cr.

-

Cr.

+

Cr.

+


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LG 3


Dr.

+

Cr.

+

Cr.

+

Dr. = Cr. + Cr


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Increase to an asset?

LG 3


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DEBIT

LG 3


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Increase to a

liability?

LG 3


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CREDIT

LG 3


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Increase to

Owners Equity

LG 3


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CREDIT

LG 3


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Increase to cash?

LG 3


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DEBIT

LG 3


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Increase to accounts

payable?

LG 3

G 3


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CREDIT

LG 3

LG 3


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Increase to capital?

LG 3

LG 3


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CREDIT

LG 3

LG 3


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RULE OF DEBIT & CREDIT

For each transaction

Total debits will equal total credits

TRANSACTION

TOTALCREDITS

TOTALDEBITS

LG 3

LG 3


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ENTRY 11/5: Bought Land for cash

Land an asset increases

__.

Cash an asset decreases:

__

LG 3

11/5SCF BS IS

A = L + E ( Rev. Exp Divid.)Dr. Cr. Cr. Cr. Dr. Dr.

LG 3


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ENTRY 11/10: Bought Supplies on account

Supplies an asset increases

AP a Liab. increases:

LG 3

11/5 1,350

1,350SCF BS IS


LG 3


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ENTRY 11/18: Fees earned, recd cash $7,500

Fees earned a revenue increases

.

Cash a Asset increases:

.

LG 3

11/18 7,500

7,500SCF BS IS


LG 3


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ENTRY 11/30: Paid expenses

Expenses an expense increases

Cash an asset decreases:

LG 3

SCF BS IS

E


30 Wages

Rent

Utilities

Misc.

Cash

2125

800

450

275

3,650

LG 3


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ENTRY 11/30: Paid AP $950

AP a Liab decreases

.

Cash a Asset decreases:

.

LG 3

11/30 950

950SCF BS IS


LG 3


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ENTRY 11/30: Paid Dividend $2,000

Dividend a Neg. E increases

.

Cash a Asset decreases:

.

LG 3

11/30 Dividend

Cash

2,000

2,000SCF BS IS


LG 3


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EXERCISE 4-2a (modified)

Identify accounts of Continental Airlines

with normal debit balance.

1. Accounts payable

2. Fuel expense3. Traffic liability

4. Cargo revenue

5. Commissionsexpense

6. Flight equipment

7. Passenger revenue8. Spare parts &

supplies

LG 3

LG 3


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EXERCISE 4-2b (modified)

Identify accounts of Continental Airlines

with normal credit balance.

1. Accounts payable

2. Fuel expense

3. Traffic liability

4. Cargo revenue

5. Commissionsexpense

6. Flight equipment

7. Passenger revenue

8. Spare parts &

supplies

LG 3

LG 3


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LG 3

Trial balance lists accounts, balances in debit,

credit columns to check recording process.

EXHIBIT 7


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LEARNING GOALS

4Describe, illustratebasic elements of

financial reporting

system.

LG 4


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END OF YEAR: 12/31/2007

Transactions for December recorded Journals, ledgers

Trial balance for December transactions

Adjustments recorded Supplies, insurance used

Revenue earned

Wages owed

Depreciation

Continued

LG 4

LG 4


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END OF YEAR: 12/31/2007

Adjusted trial balance

Final check before financial statements

Prepare financial statements

Income statement

Statement retained earnings

Balance sheet

Statement cash flows

LG 4

See

Exhibit 12

p. 166-167

LG 4


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AFTER FINANCIAL

STATEMENTS Closing entries

Transfer balances of temporary (revenue,expense, dividends) accounts to retained

earnings

Zero balances of temporary accounts to carryforward

Post-closing trial balance Final check for asset, liability, equity account

balances

LG 4


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LEARNING GOALS

5Describe accountingcycle for double-entry

accounting system.

LG 5


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ACCOUNTING CYCLE

During the period: Transactions analyzed, recorded in journals

Transactions posted to ledgers

End of period:3. Unadjusted trial balance prepared

4. Adjustment data assembled, analyzed

5. Adjusting entries prepared, recorded in journal

Continued

LG 5

LG 5


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ACCOUNTING CYCLE

6. Adjusting entries posted to ledger

7. Adjusted trial balance prepared

8. Financial statements prepared

9. Closing entries recorded in journal

10. Closing entries posted to ledgers

11. Post-closing trial balance prepared


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LEARNING GOALS

6Describe, illustrate use ofearning before interest, taxes,

depreciation, amortization

(EBITDA).

LG 6


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EBITDA COMPUTATION

Operating income (loss) before interest, taxes

+Depreciation & amortization

LG 6


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EBITDA

A measure of cash flows fromoperations to pay the fixednon-operating charges:

Interest

Taxes

LG 6


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Southwest Continental

Op. income (loss) before

interest & taxes $554 $

+ Depreciation &

amortization +431 +414

EBITDA $985 $185

SOUTHWEST VS.

CONTINENTAL

LG 6


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SOUTHWEST VS.

CONTINENTAL: Analysis

Southwest Airlines earns only __the revenue of

Continental Airlines

Southwest airlines has more than _ times the cashflow from its operations to pay fixed charges such as

interest

EBITDA is a rough estimate of cash flow generatedfrom operations to pay fixed charges

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Debit Credit Drill

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