MGMT 1A Chapter Notes - Chapter 2: General Ledger, Financial Statement, General Journal
Management 1B
October 1, 2016
Textbook: Chapter 2 – The Recording Process
Account – Individual accounting record of increases and decreases in a specific asset,
liaility, o stokholdes’ euity ite
Separate accounts needed for:
- Cash
- Accounts Receivable
- Accounts Payable
- Service Revenue
- Salaries and Wages Expense
Name must be capitalized if it is a specific account
Account inclusive of:
- Title
- Left/debit side
- Right/credit side
Account = T-account
Debits and Credits
- do not mean increase or decrease
- shows where entries are made in accounts
Debiting the account = entering an amount on the left side of an account
Crediting = entry on the right
Debit balance = when the amount has a debit total that exceeds credits
Credit balance = when credit exceeds debit in account
Account balance = net DR – net CR for assets and net CR – net DR for l/e
Double-entry system
- dual effect
o 2 or more accounts affected in each transaction
- debits = credits
Asset accounts normally show debit balances
- debits should exceed credits in that specific account
Liability/Equity accounts normally show credit balances
- credits exceed debits
Normal balance of an account is on the side where an increase in the account is recorded
- debits for assets
- credits for liabilities and equities
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Document Summary
Account individual accounting record of increases and decreases in a specific asset, lia(cid:271)ility, o(cid:396) sto(cid:272)kholde(cid:396)s" e(cid:395)uity ite(cid:373) Name must be capitalized if it is a specific account. Do not mean increase or decrease shows where entries are made in accounts. Debiting the account = entering an amount on the left side of an account. Debit balance = when the amount has a debit total that exceeds credits. Credit balance = when credit exceeds debit in account. Account balance = net dr net cr for assets and net cr net dr for l/e. Dual effect: 2 or more accounts affected in each transaction. Debits should exceed credits in that specific account. Liability/equity accounts normally show credit balances credits exceed debits. Normal balance of an account is on the side where an increase in the account is recorded. Debits for assets credits for liabilities and equities. Retained earnings = revn exp dividends.
