2. Analyzing business transactions would involve a dual
effect in any of the elements of the accounting
equation.
These dual effects would be analyzed and recorded in
terms of debit and credit.
3. Account – a detailed record of the changes that have
occurred in a particular asset, liability or owner’s
equity during a period of time.
Consists of three parts:
The title of the account
Left or debit side
Right or credit side
4. T-Account – a simplified format of account that resembles
the letter T.
The vertical line in the letter divides the account into its
left and
right sides. The account title rests on the horizontal line.
DEBIT CREDIT
left side right side
Title of account
5. Debit
Indicates left
Abbreviated as Dr
Came from the Latin word debere which originally
meant ‘debtor’
Credit
Indicates right
Abbreviated as Cr
Came from the Latin word credere which originally
meant ‘creditor’
6. ASSETS = LIABILITIES + OWNER’S EQUITY
Left or debit side
ASSETS
Right or credit side
LIABILITIES AND OWNER'S EQUITY
(REVENUE - EXPENSE)
Debit balance Credit balance
Title of account
7. This pattern of recording debits and credits is based
on the accounting equations:
Rules of Debit and Credit
= +
Debit Credit Debit Credit Debit Credit
for for for for for for
Increase Decrease Decrease Increase Decrease Increase
ASSETS LIABILITIES OWNER'S EQUITY
8. Franco Diaz invested P100,000 cash to begin his
accounting business.
The business purchased office supplies on account for
P5,000.
The business paid one year rental for its office space,
P24,000.
The business paid ½ of the amount owed in buying
office supplies.
