Accounting Terms
What is the left side of a T-account called?
Debit.
Which side of a liability account increases?
Right side (Credit).
How many accounts are affected by every transaction?
At least two.
Give one example of an Asset account.
Cash, Supplies, Accounts Receivable, or Prepaid Insurance.
What is the basic Accounting Equation?
Assets = Liabilities + Owner’s Equity
What do we call amounts owed by a business to its creditors?
Accounts Payable.
When cash is paid for supplies, which account is debited?
Supplies.
What accounts are affected when paying cash for insurance?
Prepaid Insurance and Cash.
Give one example of a Liability account.
Accounts Payable.
If Assets increase, what must happen to keep the equation balanced?
Liabilities or Owner’s Equity must also increase.
What do we call the list of all accounts used by a business?
Chart of Accounts.
What happens to Owner’s Capital when the owner invests cash? and on which side?
It increases on the credit side.
Buying supplies on account affects which types of accounts?
An Asset (Supplies) and a Liability (Accounts Payable).
Give one example of an Owner’s Equity account.
Capital or Drawing.
If Cash increases by $500 and Accounts Receivable decreases by $500, what is the overall effect on Assets?
No change (total assets remain the same).
What is the normal balance side of an asset account?
Debit side.
If cash is received on account, which account is credited?
Accounts Receivable.
When paying cash for an expense, what happens to Cash and Expense?
Cash is credited (decreases), Expense is debited (increases).
Give one example of a Revenue account.
Sales.
If the Owner withdraws money, which part of the equation decreases?
Owner’s Equity.
What is the side of an account that increases called?
Normal Balance.
What type of account has a normal debit balance but reduces Owner’s Equity?
Drawing (Contra Capital Account) and/or Expenses
What accounts are affected when receiving cash from a sale?
Cash and Sales Revenue.
Give one example of an Expense account.
Any account ending with “Expense,” such as Communications Expense.
When services are sold on account, which part of the equation is affected?
Assets (Accounts Receivable increase) and Owner’s Equity (increase through Revenue).