ACCT 115 Chapter 3: Accounting Chapter Three

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Every transaction involves at least two accounts (can be more) Double entry accounting the equality of debits and credits. Debit and credit entries for balance sheet accounts: a = l + oe, assets, liabilities: Debit the balance of the liability account goes down. Credit the balance of the liability account goes up: owners equity (capital stock + retained earnings): Debit and credit entries for income statement accounts: revenue: The price for goods sold and services rendered during a given accounting period: expenses: The costs of goods and services used up in the process of earning revenue: retained earnings: Net income, retained earnings, and owners" equity. Debit and credit rules for revenue and expenses: expenses decrease owners" equity, revenues increase owners" equity, equities: Dividends: payments to owners decrease owners" equity, owners" investments increase owners" equity, equities: Balance difference between the sum of the two sides.

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