T-Accounts
On which side of a T-account do debits go?
Left
What is the basic accounting equation?
Assets = Liabilities + Owner’s Equity
Net worth is also called what in accounting?
Owner's Equity
Cash is considered what type of account?
Asset
What are liabilities?
Debts/obligations owed to others
Assets increase on which side of a T-account
Left
If assets = $20,000 and liabilities = $12,000, what is equity?
$8,000
Net worth is calculated by subtracting what from assets?
Liabilities
Give two examples of current assets.
Cash, Accounts Receivable, Supplies, Inventory (any two)
Daily Double
Accounts Payable is an example of what?
Liability
If Cash increases, do you debit or credit the Cash account
Debit
Buying supplies on account affects which two parts of the accounting equation?
Assets (increase) and Liabilities (increase)
If assets = $15,000 and liabilities = $9,000, what is net worth?
$6,000
Equipment worth $10,000 is bought with cash. Do total assets change?
No (Cash ↓ $10,000, Equipment ↑ $10,000)
If you borrow $5,000 from the bank, which liability increases?
Notes Payable (or Bank Loan)
Which accounts normally have credit balances?
Liabilities, Equity, Revenue
If equity increases, which side of the equation must also increase?
Assets
If a business takes out a loan, what happens to net worth?
It stays the same (assets and liabilities both increase
Prepaid Insurance is what type of asset?
Current Asset
Which side of a T-account do liabilities increase on?
Credit (Right side)
Record: Owner invests $5,000 cash. Which two T-accounts are affected?
Cash (Debit $5,000), Owner’s Equity (Credit $5,000)
Company has $50,000 assets and $30,000 equity. What are liabilities?
$20,000
True or False: Net worth can be negative
Daily Double:
What is the difference between current assets and fixed assets?
Current = used within a year; Fixed = long-term use
Unearned Revenue is a liability. Why?
Because the company owes services or products to customers.