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LESSON
2-1
Using T Accounts
WHAT IS THE ACCOUNTING EQUATION
List 3 Accounting Concepts
• Business Entity
• Unit of Measurement
• Realization of Revenue
What are 3 Accounting Concepts
• Business Entity– Financial information is recorded and reported
separately from the owner’s personal financial information
• Unit of Measurement– Business transactions are stated in numbers that
have common values – that is, using a common unit of measurement.
• Realization of Revenue– Revenue is Recorded at the time goods or
services are sold
Classifications
• Accounts Receivable– ASSET
• Sales– REVENUE
• Accounts Payable– LIABILITY
• Rent Expense– EXPENSE
• Prepaid Insurance– ASSET
• Drawing– OWNER’S EQUITY
• Utilities Expense– EXPENSE
• Cash– ASSET
• Capital– OWNER’S EQUITY
• Advertising Expense– EXPENSE
• Supplies– ASSET
Classifications
•Accounts Receivable– ASSET
•Sales– REVENUE
•Accounts Payable– LIABILITY
•Rent Expense– EXPENSE
•Prepaid Insurance– ASSET
•Drawing– OWNER’S EQUITY
•Utilities Expense– EXPENSE
•Cash– ASSET
•Capital– OWNER’S EQUITY
•Advertising Expense– EXPENSE
•Supplies– ASSET
Big T
Asset = Liabilities + Owner’s Equity
Left Side Right Side
Little T Account
CASH or AP or CAPITAL or SALES
Left Side Right SideDebit Side Credit Side
Little T Account
CASH
When a company receives money what
do they do with it
When a company pays out money, how do they do it
Make a Deposit Write a Check
Debit Credit
Normal Balance
Asset = Liabilities + Owner’s Equity
Any Asset Any Liability Any OE
Left Side Right Side
Debit Credit Debit Credit Debit Credit
Normal Balance
Normal Balance
Normal Balance
Increase / Decrease
Asset = Liabilities + Owner’s Equity
Any Asset Any Liability Any OE
Left Side Right Side
Debit Credit Debit Credit Debit Credit
Normal Balance
Normal Balance
Normal Balance
Incr
ea
se
De
crea
se
Incr
ea
se
De
crea
se
Incr
ea
se
De
crea
se
Cash Supplies
Kim Park, Capital
AR –Oakdale School
Prepaid Insurance AP – Supply Depot
Debit Credit Debit Credit Debit CreditNormal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
e
Debit Credit Debit Credit Debit CreditNormal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
ASSET ASSET ASSET
ASSET LIABILITY OWNER’S EQUITY
Work Together 2-1
Workbook page 21
Textbook page 31
Cash
AR – Christine Kelly
Jeff Dixon, Capital
AP – Miller Supplies
AP – Wayne Office Supplies
Supplies
Debit Credit Debit Credit
Debit Credit
Normal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
eDebit Credit
Debit Credit Debit Credit
Normal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
ePrepaid Insurance
Debit CreditNormal Balance
Incr
ease
Dec
reas
e
ASSET
ASSET
ASSETASSET
LIABILITY
LIABILITY
OWNER’S EQUITY
Class Work
On Your Own 2-1
Cash
AR – Lee McCann
Vickie Monson, Capital
Prepaid Insurance
AP – Topline Supplies
AR – Sonya Lopez
Debit Credit Debit Credit
Debit Credit
Normal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
eDebit Credit
Debit Credit Debit Credit
Normal Balance
Normal Balance
Normal Balance
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
e
Incr
ease
Dec
reas
eSupplies
Debit CreditNormal Balance
Incr
ease
Dec
reas
e
ASSET
ASSET
ASSETASSET
ASSET
LIABILITY
OWNER’S EQUITY
Homework
Application 2-1
TERMS REVIEW
• T account
• debit
• credit
• normal balance
