Accounting1-4_2

accounts or General Ledger

T-accounts

T-account

a big T with a left and a right side. The left side of a T-account is called the debit side and the right side of the T-account is called the credit side. This does not change, no matter what classification of account you are working with. What does change, however, is which side of the account you enter dollar amounts on

General Ledger

a book of all the accounts business uses

Chart of Accounts

a list of all the accounts used by a business, organized by account classification

CLeRC

accounts that increase on the credit side are liabilities, revenue, and capital accounts

DEAD

accounts that increase on the debit side are expenses, assets, and drawing

transaction

activity that changes two or more accounts

the debits and credits always equal after each transaction

each transaction affects at least two accounts: one by a debit entry and the other by a credit entry

balance sheet

financial report that shows the account balance and proves the equality of debits and credits in the General Ledger

increase the credit balance

if you enter a credit transaction into an account with a credit balance

increase the debit balance

if you enter a debit transaction into an account with a debit balance

Liability, capital, and revenue accounts

increase on the credit side and decrease on the debit side

normal balance side

increase side of any account

asset, expense, drawing accounts

increased on the left or debit side and decreased on the right or credit side

arranged alphabetically

liability and expense accounts

balance sheet

proves the accounting equation

normal balance side

the balance in an asset account would be on the debit side, the balance in a liability account would be on the credit side

double ruling

two lines close together under each column total in the balance sheet. This shows that the assets equal liabilities plus owners' equity. This is accounting equation that must remain equal at any given point.