Ch 3.2 Understanding Normal Balances

Question 1

T account components

Answer 1

title of account

left/debit side

right/credit side

Question 2

Synonym of T account

Answer 2

General Ledger account

Question 3

Ledger

Answer 3

entire collection of general Ledger accounts/T accounts

Question 4

Debit

Answer 4

incoming money

Question 5

Credit

Answer 5

outgoing money

Question 6

Normal Balance

Answer 6

indicates what side of the T we normally ezpect to find an accounts ending balance

Question 7

Normal Balance

ASSETS = LIABILITIES + SE

Answer 7

ASSETS | LIABILITIES + SE
_________|_____________________
|
|
|
|

Question 8

How do we use the normal balance?

Answer 8

• if we know an accounts normal balance, recording transactions on the side of the account increases the account balance

-recording transaction on the OPPOSITE sitde of the accounts normal balance reduces the amount

Question 9

What is what accounts normal balance

Answer 9

ASSETS | LIABILITIES + SE
_________|_____________________
|
Left | Right
Debit | Credit
|

Question 10

Assets normal balance is…

If you increase asset accounts you enter it in…

If you decrease asset accounts you enter it in…

Answer 10

debit balance

-debit side
-Credit side

Question 11

Liabilities and SE is…

Answer 11

credit balance

Question 12

Do you record signs in T accounts

Answer 12

NEVER, just put them in the appropriate side

Question 13

why use t account

Answer 13

-separates increases and decreeases of account on two separate sides

-easy to determine ending account balance: net the two sides, subtract one from another

Question 14

what does the ending account balance mean,

ex: the cash account balance

Answer 14

The Cash account balance, a debit balance of $11,400, indicates that Sierra had $11,400 more increases (debits) than decreases (credits) in cash during the month.

Question 15

LIabilities normal balance..

which side do you record increases?
which side do you record decreases?

Answer 15

Credit Balance

right side/credit side
left side/ debit side

Question 16

SE is made up of what two accounts?

___ and ___ normal balance..

CS normal balance?

Answer 16

Common Shares +

Credit Balance

right side/credit side
left side/ debit side

Question 17

How do you break up retained earnings even further?

Answer 17

Revenues - Expenses- Dividends Declared

Question 18

Revenue account normal balance

Answer 18

Credit Balance, because increasing revenue increases net income, which increases retained earnings

SO!

+ in revenue = credit side
- in revenue = debit side

Question 19

Expense account normal balance

Answer 19

Debit Balance, because decreases net income, decreases retained earnings

SO!

+ in expense= debit side
- in expense = credit side

Question 20

Dividends declared account normal balance

Answer 20

Debit Balance, because decreases net income, decreases retained earnings

SO!

+ in expense= debit side
- in expense = credit side