Chapter 2

8) is the drawing account increased on the debit side or credit side?

Debit because withdrawals decrease owner's equity.

2) What are the two accounting rules that explain increases of account balances?

1) assets are on the left side of the accounting equation. So assets increase on the left. 2) liabilities and owner's capital accounts are on the right side of the accounting equation. So they increase on the right side.

3) state the four questions used to analyze a transaction.

1) which accounts are affected? 2) how is each account classified? 3) how is each classification changed? 4) how is each amount entered in the accounts?

Chart of accounts

A list of accounts used by an business

6) what two accounts are affected when a business sells service on account

Accounts receivable and sales

Accounts payable

Amounts to be paid in the future for goods and services already acquired

Accounts receivable

Amounts to be received in the future due to the sale of goods or services

T account

An accounting device used to analyze transactions

Debit

An amount recorded on the left side of an account

Credit

An amount recorded on the right side of an account

1) Draw the accounting equation on a T account

Assets= liabilities + owner's equity

7) what two accounts are affected when a business receives cash on account?

Cash and accounts receivable.

5) what two accounts are affected when a business pays cash for a cell phone bill?

Communications expense and cash

9) are revenue accounts increased on the debit side or credit side?

Credit because revenue increases owner's equity.

4) what are the two accounts affected when a business buys supplies on account?

The accounts affected are supplies and accounts payable.

Normal balance

The side of an account that is increased