Accounting 1 - Debits & Credits - Practice Accounting Flashcards
T-accounts
Charts used to record increases and decreases of individual accounts found on the balance sheet.
Debits
Represent an increase in an asset but a decrease in a liability or equity.
Credits
Represent a decrease in an asset but an increase in a liabilty or equity.
Asset accounts will normally have
Debit balances.
Liability & Equity accounts will normally have
Credit balances.
Two special equity accounts are
Revenues and Expenses.
Increases in equity and usually have a credit balance:
Revenues
Decreases in equity and usually have a debit balance.
Expenses
Are debited and credited like other equity accounts.
Revenues
Are debited and credited like asset accounts.
Expenses
Income Statements are
Used to calculate net income.
Net income:
The difference between total revenues and total expenses (Net Income = Total Revenues ? Total Expenses)
Company’s Financial position
Shown by Balance Sheets (record one point in history)
Company?s Financial performance
Measured over a period of time in Income Statements.
General Journal
The chronological record of every transaction.
A journal uses the same rules as a
T-account uses the same rules as
General Ledger
The collection of all T-accounts.
Revenues and Expenses are
Temporary accounts. At the end of a period they are closed out and their balances are transferred to the income statement.
Other asset, liability, and equity accounts are
Permanent accounts. They are not closed out, and their balances are transferred to the balance sheet.
