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ACCT 121 Lecture 2: Chap 2 Part 1

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School
Mercy College
Department
Accounting
Course
ACCT 121
Professor
Denise Stefano

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Document Summary

Individual accounting record of increases and decreases in a specific asset, liability, or stockholders" equity item: for example, softbyte inc. would have separate accounts for cash, accounts. Receivable, accounts payable, service revenue, salaries and wages expense, and so on. (note that whenever we are referring to a specific account, we capitalize the name. ) In its simplest form, an account consists of three parts: (1) a title, (2) a left or debit side, and (3) a right or credit side. Because the format of an account resembles the letter t, we refer to it as a t account. Debits and credits: debit indicates the left side of an account, credit indicates the right side. They are commonly abbreviated as dr. for debit and cr. for credit. They do not mean increase or decrease, as is commonly thought.

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Related Questions

1. Accounts are classified in the ledger

a. chronologically

b. alphabetically

c. in accordance with their appearance in the financial statements

d. so that accounts used most often are listed first

 

2. Which of the following accounts is an owner's equity account?

a. Cash

b. Accounts Payable

c. Prepaid Insurance

d. Ross Morris, Capital 

 

3. The debit side of an account

a. depends on whether the account is an asset, liability, or owner's equity

b. can be either side of the account depending on how the accountant set up the system

c. is the right side of the account

d. is the left side of the account.

 

4. Which statement(s) concerning cash is (are) true?

a. cash will always have more debits than credits

b. cash will never have a credit balance

c. cash is increased by debiting

d. all of the above

 

Identify a business or personal financial transaction. (You canchoose any one you like, it doesn't have to be one in thetextbook). Then answer the following questions which should resultin correctly identifying the accounts to be debited and credited:REQUIRED: 1) What are the specific accounts that are affected?(i.e. Cash, Accounts Receivable, Land, etc.) REMEMBER THAT THEREMUST BE AT LEAST 2 SPECIFIC ACCOUNTS AFFECTED. 2) What BROAD typeof Account do they belong to? (i.e. Asset, Liability or Equity) 3)Does this transaction result in an INCREASE or DECREASE to theaccount(s) in #2 above? 4) Using the rules for Debits and Creditsidentify which SPECIFIC ACCOUNT (#1) is to be debited and which isto be credited. REMEMBER: 1. ASSETS are on the LEFT side of theaccounting equation and therefore they INCREASE on the LEFT, DEBITSIDE; LIABILITIES AND EQUITY are on the RIGHT SIDE of the equationand therefore they INCREASE on the RIGHT, CREDIT side. 2. TOTALDEBITS MUST EQUAL TOTAL CREDITS!

In this chapter we were provided a chart of accounts withsixteen accounts in exhibit 2 in the text.

From that chart of accounts select an account (try to pick onethat has not been discussed yet), in the subject box put theaccount title you selected, then do the following:

1. Assets, Liabilities, Owner's Equity, Revenues, and Expensesare the five categories (account types) that an account can beclassified as. Which category is the account you selected includedin?

2. The double-entry accounting system has specific rules forrecording debits and credits based on the type of account. Describehow these rules apply to the account you selected. How is theaccount increased and how is it decreased?

3. The normal balance of an account can be either a debit or acredit depending on whether increases in the account are recordedas debits or credits. What is the normal balance of the account youselected?

4. Think of a transaction that your account would be used in. Donot copy an entry from the book. Describe and illustratejournalizing the transaction, in the proper journal entryformat.