# Learning Exercise

## Accounting Debits vs. Credits

Students will answer questions about the T-account of each account given. They will need to decipher if the account has a debit balance or a credit balance and which is its normal increase side. A worksheet is given to each student that I created in Microsoft Excel to really display the T-accounts and how the Accounting Equation truly works. We will first take notes as a class, then review the worksheet I created in MS Excel and finally the students will complete the assessment worksheet at the end of the period.
Course: Accounting
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#### The Accounting Cycle, A Debit and Credit Approach

The Accounting Cycle, a Debit and Credit Approach by Walter Antoniotti explains accounting for a merchandising company.... see more

#### Exercise

Key terms Account: a location within an accounting system in which the increases and decreases in a specific asset, liability, or owners equity are recorded and stored Ledger: a book or file containing a separate page for each business account. It serves as a permanent record of financial transactions Chart of Accounts: a list of all the accounts and their assigned account numbers Assets begin with 1, Liabilities begin with 2, Owners Equity begin with 3, Revenue begin with 4, Expense begin with 5. Double Entry Accounting: a system of record keeping in which each transaction affects at least two accounts (requires at least two accounts be affected w/ every transaction) T accounts: because of its T-shape, shows the dollar increase or decrease in an account that is caused by a transaction *T accounts help the accountant analyze the parts of a business transaction Debit: an amount entered on the LEFT side of the T account Credit: an amount entered on the RIGHT side of the T account *The words DEBIT and CREDIT are the accountants terms for LEFT and RIGHT Normal Balance: an accounts normal balance is always on the side used to record increases to the account. *Normal = increase. Whatever side increases the account is the normal balance *You will always have at least (1) Debit and at least (1) Credit. *You will never have ONLY 2 Debits or ONLY 2 Credits *After each transaction what you Debit must = what you Credit Rules for Asset Accounts 1. An asset account is INCREASED (+) on the DEBIT side (left side). 2. An asset account is DECREASED (-) on the CREDIT side (right side). 3. The normal balance for an asset account is the INCREASE side, or the DEBIT side. Rules for Liability and Owners Equity 4. Liability and Owners Equity accounts are INCREASED on the CREDIT side (right side). 5. Liability and Owners Equity accounts are DECREASED on the DEBIT side (left side). 6. The normal balance for liability and owners equity accounts is the INCREASE side, or the CREDIT side.

#### Requirements

1. Understand that Accounting Equation: Assets = Liabilities + Owner's Equity 2. Able to categorize the accounts into their proper category (define asset, liability, and owner's equity and give an example of each). 3. Draw a T-account and label it with an account name.

#### Topics

T-Accounts Assets Liabilities Owner's Equity Normal Balance Increase Side/Decrease Side Accounting Equation