Ayah Eca

Accounting Theory This article will help you understand an important distinction in accounting and bookkeeping- the difference between a credit and debit. When you deposit money in the bank, the cashier will tell you "I'll credit your account." From that experience, most people assume that cash is a credit, and so credits are good. That is further reinforced when reductions in the accounts are referred to as debits. Besides, if you remove the "i" from debit, you get "debt." So, debits are bad. Unfortunately, the conditioning we receive at the bank is causing real confusion in the accounting class. Why? Because in accounting we understand that the bank account is a debit account, and that debts are credit accounts - the opposite of what most people expect. In fact, debits and credits are neither good nor bad. Each transaction, whether it be a good transaction (deposits), or a bad transaction (bills) has both a debit and an equal credit. That...

Basic Accounting Model: Assets = Liabilities + Owners Equity Assets: The following are examples of items classified as assets: · Cash · Notes Receivable · Accounts Receivable · Prepaid Expenses · Land · Buildings · Equipment, Furniture and Fixtures Liabilities: The following are examples of items classified as liabilities: · Notes Payable · Accounts Payable · Accrued Liabilities T-Account Basics: Accounting is based on a double entry system which means that we record the dual effects of a business transaction. Therefore, each transaction affects at least two accounts. Debit: An entry affecting the left side of a T-Account. Credit: An entry affecting the right side of a T-Account. Increases in assets are recorded on the left side (debit) of the account. Decreases in assets are recorded on the right side (credit) of the account. Increases in liabilities and owners equity are recorded as a (credit). Decreases in liabilities and owners equity are recorded as a (debit). Accounting Terminolo...

Most of financial accounting is based on double-entry bookkeeping. To understand and appreciate the advantages of double entry, it is worthwhile to examine the simpler single-entry bookkeeping system. In its most basic form, a single-entry system is similar to a checkbook register and is characterized by the fact that there is only a single line entered in the journal for each transaction. In a simple checkbook, each transaction is recorded in one column of an account as either a positive or a negative amount in order to represent the receipt or disbursement of cash. This system is demonstrated in the following example for a repair shop business: Single Column System Date Description Amount Jan 1 Beginning Balance 1,000.00 Jan 2 Purchased shop supplies (150.00) Jan 4 Performed repair service 275.00 Jan 7 Performed repair service 125.00 Jan 15 Paid phone bill (50.00) Jan 30 Ending balance 1,200.00 While extremely simple, because the above syst...