Chapter 3 – Debits Credits and Journals
Acct 2210 Zeigler: Chp 3: Double-Entry Accounting
H/W: Demos, E3-1A, P3-32A, P3-31A, ATC 3-1, ATC 3-3, Canvas & Other
1) Let’s use Double-Entry Accounting “shorthand” to simplify the transaction recording process:
The use of “T-Accounts” (pg 140) can act as a helpful diagram to analyze transactions with Debits & Credits.
** Remembering the Acct Equation…. “A = L + S/E”,
a) Debits (entry on left of “T”): indicates an increase in
all accts on the left-hand side of the acct equation.
b) Credits (entry on right of “T”): indicates an increase
in all accts on the right-hand side of the acct equation.
c) Two fundamental equality requirements exist:
1) The accounting equation must balance, and
2) Total debits must equal total credits.
2) Terminology & Mechanics:
a) General Journal: Record the transactions (pg 149).
b) General Ledger: Collection of all accounts used (pg 151).
c) Posting: Transfer from Journal to Ledger (pg 151).
d) Trial Balance: Internal accounting schedule to periodically test whether all debits equal credits (pg 153).
(Trial Balance, Adjusted T/Balance, Post-Closing T/Balance)
e) Prepare any adjustments at end of accounting period.
f) Prepare Financial Statements and analyze (pg 154).
g) Prepare Closing entries and begin a new Acct period.
- Closing process to Retained Earnings (pg 155-156).
3) Ratios: How is Management doing? (pg 157-160)
a) ROA: Return on Assets (i.e. return on all assets)
b) Debt to Assets Ratio (measure of financial risk)
c) ROE: Return on Equity (i.e. return for the owners)
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