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Using T-Accounts to Help Analyze Transactions

Using T-Accounts to Help Analyze Transactions. What you already (should) know!. Basic Accounting Equation Assets = Liabilities + Owner’s Equity Assets Anything of value owned by a business. Liability Anything owed by a business Owner’s Equity

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Using T-Accounts to Help Analyze Transactions

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  1. Using T-Accounts to Help Analyze Transactions

  2. What you already (should) know! • Basic Accounting Equation • Assets = Liabilities + Owner’s Equity • Assets • Anything of value owned by a business. • Liability • Anything owed by a business • Owner’s Equity • The rights the owner has to the things owned by the business.

  3. What you are going to learn • T-Accounts • A simple tool used to aid in the analysis of business transactions. • T-Accounts are an extension of the basic accounting equation • Much more orderly way of keeping track of stuff.

  4. Account Title Debit Credit

  5. Basic Accounting Equation as a HUGE T-Account Debit Credit ASSETS LIABILITIES OWNER’S EQUITY

  6. So What? • Anything classified as an asset increases on the debit (left) side. • Anything classified as a liability or owner’s equity increases on the credit (right) side. • The side that increases any account in called the normal balance side. • The words debit and credit only mean left and right, nothing more or less!

  7. For every action… • Every business transaction must have at least one debit and one credit.

  8. How Do We Classify • Memorization at first • It will eventually become intuitive

  9. Suggestions for Learning How to Analyze and Classify Transactions • Take good notes of examples • There are only a few basic types of transactions • Review examples, looking for similarities • A great deal of prayer… 

  10. Pg 45 Pg 46 Pg 47 Pg 48 Pg 49 Pg 51 Pg 52 Pg 53 Pg 54 Pg 55 T-Account Practice Sheet (later) Good Examples

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