Level 1
Are debits recorded on the right or left-hand side of a T-account?
On the left-hand side
What are the elements of a T-Account?
A title
Left Side (Debit)
Right Side (Credit)
What is the normal balance of a revenue account?
Credit Side
(Increase: Credit, Decrease: Debit)
Laura, the owner of Vintage Law Firm withdrew 400 dollars for personal use.
Drawings is debited 400
Cash is credited $400
Laura’s Lawn services billed a company for $1000 for lawn maintenance services performed on account. Which accounts are affected and by how much?
A/R 1000
Service Revenue 1000
What side are credits recorded on?
Recorded on the right-hand side
What are assets?
items of value owned by a business or individual
What is the normal balance of a drawing account?
Debits side
(Increases: debits, Decreases: credit)
Vintage Law Firm borrowed $22,000 from the bank and signed a $22,000, 6-month, 4% notes payable.
Cash is debited $22,000
Notes Payable is credited $22,000
Laura’s lawn services received a bill from “GOSSIP TOWN” for advertising the opening of their store, for $400. Which accounts are affected and by how much?
Advertising expense 400
A/P - Gossip Town 400
What is the Double-Entry Accounting System?
A system that records the two or more accounts that are affected by a transaction
What are liabilities?
A debt a business has to owe to another individual/business (most frequently cash).
What does the accounting equation represent?
Equation that represents the relationship between assets, liabilities, and owner’s equity
Vintage Law Firm billed their client, Ryan, 300 dollars for law services performed on account.
Accounts Receivable is debited 300 dollars
Service Revenue is credited 300 dollars
Laura’s Lawn Company purchased lawn mowers on account from Alpine Lawn for $1,500.
Equipment is debited by $1, 500
Accounts Payable is credited by $1,500
True or False: A debit balance occurs when the total of the credit amounts is greater than the total debit amount
False
Describe what owner's equity is.
What is remaining in the possession as the business owner after the liabilities have been satisfied (paid off).
What is the accounting equation?
Assets = Liabilities + Owner’s Equity
Vintage Law Firm paid 40% of the office rent of $2,000 for the month of November.
Rent Expense is debited $800 (2000*0.4)
Cash is credited $800
Laura’s Lawn Company paid 20% of the $1,500 as partial payment of its account payable.
Accounts Payable is debited by $300 (1,500 * 0.2)
Cash is credited by $300
What are T-Accounts?
A document that is used to monitor the balance of an individual account
How does you balance a T-account (for an individual account)?
Both sides of T-Accounts is totaled
Subtract (larger number from smaller number)
Record the balance (under the larger number side)
If debts do not equal credits (double entry accounting system), what will occur?
Debits must equal credits → If rule is not followed, the ledger will be inaccurate
Vintage Law Firm received 60% of the $300 dollars from Ryan in payment of part of its account.
Cash is debited by $180 (300*0.6 = 180)
Accounts Receivable credited by $180
Laura, the owner of Laura’s Lawn Company invested $10, 000 cash and $2,000 worth of equipment in the business.
Cash is debited $10, 000
Equipment is debited $2,000
Laura’s Capital is credited by $12, 000