Accounting Applications Honors Unit 2 Notes

Accounting Applications: Unit 2
2.01 Double-Entry Accounting
●​ Double-entry accounting: An accounting system where every transaction is recorded
using opposing entries in at least two different accounts.
●​ Debits: Left side
●​ Credits: Right side
●​ Normal balance: The side of the T-account that is increased.

Account Rules & Normal Balances
Debit Credit
Increases Increases


Assets Liabilities



Expenses Revenues



Withdrawals Capital



●​ ​
Normal Debit Balance: Increase on the debit side.
●​ Normal Credit Balance: Increase on the credit side.


T-Accounts & Accounting Equations
●​ T-accounts: The visual representation of a journal entry's effect on the general ledger
account.

Basic Accounting Equation
Assets=Liabilities+Owner’s Equity {Assets} = {Liabilities} + {Owner's
Equity}Assets=Liabilities+Owner’s Equity

, All Assets All Liabilities Owner's Capital


Debit: Increase (Normal Debit: Decrease Debit: Decrease
Balance)



Credit: Decrease Credit: Increase (Normal Credit: Increase (Normal
Balance) Balance)




Analyzing Transactions
5 Analyzing Transactions Questions

1.​ Which accounts are affected?
2.​ What is the amount?
3.​ Is the account an asset, liability, or owner's equity?
4.​ Is the account increased or decreased?
5.​ Is the account debited or credited?


Account Behavior Overview
●​ Expenses: Has a normal debit balance. Expenses decrease owner's equity; expenses
increase.
●​ Credit: Increases owner's equity; debits decrease the owner's equity account.
●​ Owner's Drawing: Has a normal debit balance. Decreases owner's equity; drawing is
recorded as a debit; drawing increases.
●​ Revenue: Has a normal credit balance. Revenue increases owner's equity; recorded as
a credit; revenue increases.


The Expanded Accounting Equation
1.​ Assets=Liabilities+Owner’s Equity{Assets} = {Liabilities} + {Owner's
Equity}Assets=Liabilities+Owner’s Equity
2.​ Replace owner's equity in the basic accounting equation with Revenues+Owner’s
Capital−Expenses−Owner’s Drawing{Revenues} + {Owner's Capital} - \text{Expenses} -
{Owner's Drawing}Revenues+Owner’s Capital−Expenses−Owner’s Drawing:​
Assets=Liabilities+Revenues+Owner’s Capital−Expenses−Owner’s Drawing{Assets} =
{Liabilities} + {Revenues} + {Owner's Capital} - {Expenses} - {Owner's
Drawing}Assets=Liabilities+Revenues+Owner’s Capital−Expenses−Owner’s Drawing