Chapter 2 Flashcards
Debits & Credits: Analyzing & Recording Business Transactions
if revenues > expenses
net income, increases equity
if revenues < expenses
net loss, decreases equity
what are withdrawals
assets removed from the business to pay personal expenses (decreases owner’s equity so remove from capital)
what goes on an income statement?
company name
income statement
for month ended…
revenue:
fees
operating expenses:
expenses
total operating expenses:
net income (revenue - expenses)
what goes on a statement of owner’s equity?
company name
statement of owner’s equity
for month ended…
capital (beginning of month)
net income for month (from incomes statement)
less: withdrawals
increase/decrease in capital (net income-withdrawals)
capital at end of month (capital +/- increase/decrease)
when is it an increase in capital
income > withdrawals (subtract, add totals on the right together)
when is it a decrease in capital
income < withdrawals (subtract, subtract totals on the right too)
what goes on a balance sheet?
company name
balance sheet
month & year
assets on left side:
cash
accounts receivable
equipment
supplies
total assets
liabilities & owner’s equity on right side:
liabilities:
accounts payable
owner’s equity:
capital
totals = total assets
what is the structure of T accounts
left side: title & debit side
right side: account # & credit side
how do you balance an account
add items on each side
subtract the smaller # from larger #
list total on side with larger #
what increases on the debit side
assets, withdrawals, & expenses
what increases on the credit side
liabilities, capital, & revenue
debit totals =
credit totals
what is the transaction analysis
which 2 accounts are affected
increase or decrease?
T account
what is a ledger
group of accounts that records data from business transactions
