1	PRINCIPLES OF ACCOUNTING Preparing Journal Entries
2	ACCOUNTING EQUATION Assets and Expenses are both on the debit (left) side of the equals sign Liabilities, Owner’s Equity and Revenues are all on the credit (right) side of the equals sign
3	DEBITS (Dr) AND CREDITS (Cr) Assets and Expenses are on the debit (left) side of the equals sign, so the normal balance of these accounts is DEBIT Liabilities, Owner’s Equity and Revenue are all on the credit (right) side of the equals sign, so their normal balance is CREDIT
4	DEBIT OR CREDIT RULE
5	INCREASE LIABILITY
6	CORRECT!
7	INCREASE AN ASSET
8	CORRECT Post to the normal balance side to increase any account Assets have a debit normal balance So posting to the debit side of an asset account increases its balance
9	DECREASE LIABILITY
10	CORRECT!
11	Balancing the Books
12	DOUBLE-ENTRY BOOKKEEPING Whatever is done to the debit (left) side of the accounting equation must also be done to the credit (right) side of the equation. So all journal entries must include at least two accounts (one debited and one credited), but there may be three or more accounts.
13	Journal Entries Every journal entry must include at least one debit and one credit The total of the debited amounts must equal the total of the credited amounts Then the entry is “in balance”
14	Look for Key Words Transactions always affect at least two accounts. Key words point to those accounts. Identifying key words unlocks the solution.
15	CA$H
16	CA$H
17	Mnemonic
18	An old country store had a sign on the wall
19	On Open Account But most businesses do offer credit to customers In fact, transactions between businesses are almost always on account The words “on account” means that the transaction is charged to a revolving credit account, which is similar to a credit card
20	On Account of Key Words
21	AR or AP If the firm will eventually have to PAY for the purchase, use Accounts Payable (AP) But if the firm will eventually RECEIVE a payment from a customer, use Accounts Receivable (AR)
22	Purchase Example
23	CORRECT!
24	Purchase Example
25	CORRECT
26	Purchase Example
27	CORRECT!
28	SUPPLIES ACCOUNT
29	CORRECT!
30	Deposit of Money
31	CORRECT!
32	Deposit of Money
33	EXCELLENT JOB!
34	“Dr” means “Debit” “Cr” means “Credit”
35	“Dr” means “Debit” “Cr” means “Credit”
36	CORRECT!
37	“Dread” Accounting
38	Summary Every journal entry must include at least one debit account and one credit account Total debits = total credits Key terms point to names of the accounts