chapter 2

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20 Apr 2012
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CHAPTER 2
The Recording Process
LECTURE OUTLINE
1. The Account
An account is an individual accounting record of increases and decreases in a
specific asset, liability, or owner’s equity item.
1.2 An account consists of three parts:
1.2.1 The title of the account.
1.2.2 A left or debit side.
1.2.3 A right or credit side.
1.3 The positioning of these parts resembles the letter T, and therefore the
account form
is called a T account.
2. Debits and Credits
2.1 The term debit refers to the left side of an account and credit refers to the
right, side of an account.When the debit amounts exceed the credits, an
account has a debit balance; when the reverse is true, the account has a
credit balance.
2.2 In a double-entry system, equal debit and credit amounts are entered in
the accounts for each transaction. Thus, the total debits will always equal
the total credits
2.3 Assets, drawings, and expenses are increased by debits and decreased
by credits.
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