Financial Accounting Chapter 2 Assignment Essay
What is an account?
An account is an accounting record of increases and decreases in a specific asset, liability, or owner’s equity item. For example, Softbyte (the company discussed in Chapter 1) would have separate accounts for Cash, Accounts
Receivable, Accounts Payable, Service Revenue, and Salaries Expense. In its simplest form, an account consists of three parts: (1) a title, (2) a left or debit side, and (3) a right or credit side. Because the format of an account resembles the letter T, we refer to it as a T account.
Debits and Credits
The terms debit and credit are directional signals: Debit indicates left, and credit indicates right.They indicate which side of a T account a …show more content…
A single line (a totaling rule) is placed under the column of figures to be added or subtracted. Total amounts are double-underlined to indicate they are final sums.
Class Exercise – 1
For each of the following accounts indicate the effect of a debit or a credit on the account and the normal balance.
Increase (+), Decrease (–).
1. Salary expense.
2. Accounts receivable.
3. Service revenue.
4. Smith, Capital.
5. Smith, Drawing.
Class Exercise – 2
Journalize the following business transactions in general journal form. Identify each transaction by number. You may omit explanations of the transaction.
1. Kevin Diaz invested £50,000 cash to start an appliance repair business.
2. Hired an employee to be paid £400 per week, starting tomorrow.
3. Paid two years’ rent in advance, £7,200.
4. Paid the worker’s weekly wage.
5. Recorded revenue earned and received for the week, £1,500.
Account Title & Explanation
Class Exercise – 3
For each of the following transactions of Chen Inc., identify the account to be debited and the account to be credited. 1. Purchased 18-month insurance policy for cash.
2. Paid weekly payroll.