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.