Question: 1: Class remember there is a double sided effect of accounting. Basically an account will have two sides, whatever happens with one side must happen to the other. For every transaction on the left, there must be one on the right. Increases in organizational assets are debited to an organizations asset account. Increases in liabilities and shareholder stakes are credited to liability and shareholder stake accounts.
2: Hi Todd and Class,
Well noted Todd. For every transaction there must be at least on account debited and one account credited. Increases in assets are debited to asset accounts. Increases in liabilities and owner's equity are credited to liability and owner's equity accounts. One of the more difficult points to understand is the application of these rules to the owner's equity components of revenues, expenses and withdrawals. Revenues increase owner's equity and expenses and withdrawals decreases owner's equity. For every transaction there needs to be a reaction. So if you debit one account you need to credit the other to have a balance.
3: A T account are vertical and horizontal lines that connect in the shape of a T to analyze account transactions that consist of assets, liabilities and equity. These are called classification of accounts.
The left side of the T reflect credits and the right side reflect debits for each classification.
By creating individual T accounts for each transaction it makes it easier to create true transaction record for the balance sheet . Based on the information determined for each T account listed it is easier to list each category (pivot tables), debit, credit and balance.
4: According to our reading material chapter 3 section 1 objective 3.1, a T account consists of vertical line and a horizontal line that resembles the letter T. These T accounts are helpful when analyzing transactions. Many accounts use these accounts to analyze their transactions. It is very helpful to see that our chapter had an example of a T account:
Assets = Liabilities + Owner's equity
Using T accounts help us to simplify record keeping by grouping certain transactions together. Debit purchases are to the left of the T and credit purchases are to the right of the T. The balance for each transaction is kept at the bottom of each account.