ACCOUNTING 1 DEBITS AND CREDITS PRACTICE By Mr

ACCOUNTING 1: DEBITS AND CREDITS PRACTICE By Mr. Duvall

PROBLEM 4 -2, PAGE 88 A ( NSWER) 1. a. Office Equipment (asset) is increased (debit). 1. b. Accounts Payable (liability) is increased (credit). 2. a. Office Furniture (asset) is increased (debit). 2. b. Alice Roberts, Capital (owner’s equity) is increased (debit). 3. a. Accounts Payable (liability) is decreased (debit). 3. b. Cash in Bank (asset) is decreased (credit).

WHAT’S WRONG HERE? Description The business bought office supplies on account for $850. Transaction Analysis Account Category Increase/Decre ase Debit Amount Office Supplies Asset Increase $850 Accounts Payable Liability Increase $850 Credit Amount $850

WHAT’S WRONG HERE? Description The business paid $200 on account to Northern Office Supplies. Transaction Analysis Account Category Increase/Decre ase Debit Amount Accounts Payable Asset Liability Decrease $200 Cash Asset Decrease Credit Amount $200

WHAT’S WRONG HERE? Description The business received $200 payment on account from customer Harry Navel. Transaction Analysis Account Category Increase/Decre ase Debit Amount Cash Asset Increase $200 Accounts Payable Receivable Liability Asset Decrease Credit Amount $200

WHAT’S WRONG HERE? Description The owner transferred a computer of her own valued at $1, 100 to the business. This one is a-ok! Transaction Analysis Account Category Increase/Decre ase Debit Amount Computer Equipment Asset Increase $1, 100 Capital, Owner’s Equity Increase Credit Amount $1, 100

WHAT RULES DO YOU SEE SO FAR? Even with double-entry accounting, the accounting equation still stays in balance Each transaction has a debit and a credit Each transaction affects at least two accounts An asset’s increase side (debit) is the opposite of the increase side for liabilities and owner’s equity (both credit)

WHAT RULES DO YOU SEE SO FAR? (CONTINUED) If a transaction affects an asset and a liability, both will increase (or decrease) If a transaction affects an asset and owner’s equity, both will increase (or decrease) If a transaction affects two asset accounts, one will increase and one will decrease In the book examples, the debit side of the transaction is always first, and the credit side is always second