Once you understand the relationship of debits and credits to the different types of balance sheet accounts, things start to make a lot more sense, and you begin to understand the power behind this very old, but beneficial bookkeeping system.
- Assets equal liabilities plus owner's equity. … Debits equal credits. … If you hang on to these two equalities, all will be well. … Let us now see how these two equations work together … with some examples. … Now, notice what these qualities mean for the investment … by owner's transaction we discussed previously. … On an asset account, cash is debited. … It's increased. … An owner's equity account, capital stock is credited. … It's also increased. … There is both a debit and a credit for the transaction, … and we have increased accounts on both sides … of the accounting equation by an equal amount, … thus keeping the accounting equation in balance. … To make sure you understand the relationship … between debits and credits, … the various accounts, and the accounting equation, … we need to examine further … the remaining transactions we've discussed previously. … When cash is borrowed from a bank, … cash is increased with a debit, … and notes payable a liability is increased with a credit. …
- Reviewing financial statements
- Analyzing transactions
- Categorizing transactions
- Obtaining financing and buying equipment
- How revenue and expenses fit in the accounting equation
- Recording the sale of goods or services
- Posting journal entries to accounts
- The accounting cycle: step by step
Skill Level Beginner
1. Review of the Financial Statements
2. Fours Steps in the Bookkeeping Process
3. How Transactions Affect the Accounting Equation
4. The General Ledger
5. Illustration of the First Three Steps in the Accounting Cycle
The role of computers3m 44s
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