ACC100 Master Study Notes - Week 2 (Debits &
Credits)
🎯 CRITICAL FOUNDATION: T-ACCOUNTS & DEBITS/CREDITS
What is a T-Account?
Visual representation of a ledger account
Account Name
Debit Side | Credit Side
(Left) | (Right)
Key Rules:
Left side = DEBIT side
Right side = CREDIT side
Used to track increases and decreases in accounts
⚖️ THE GOLDEN RULE: DEBITS & CREDITS NORMAL BALANCES
🏛️ ASSETS (Left side of Accounting Equation)
Normal Balance: DEBIT
Increase: DEBIT
Decrease: CREDIT
💳 LIABILITIES (Right side of Accounting Equation)
Normal Balance: CREDIT
Increase: CREDIT
Decrease: DEBIT
👤 OWNER'S EQUITY (Right side of Accounting Equation)
Normal Balance: CREDIT
Increase: CREDIT
Decrease: DEBIT
📊 OWNER'S EQUITY SUB-ACCOUNTS
Owner's Capital
Normal Balance: CREDIT
Increase: CREDIT
Decrease: DEBIT
Owner's Withdrawals (Drawings)
Normal Balance: DEBIT (opposite of Owner's Equity)
Increase: DEBIT
Decrease: CREDIT
Revenues
Normal Balance: CREDIT (increases Owner's Equity)
Increase: CREDIT
Decrease: DEBIT
Expenses
Normal Balance: DEBIT (decreases Owner's Equity)
Increase: DEBIT
Decrease: CREDIT
🧠 MEMORY DEVICES FOR DEBITS & CREDITS
The "DEALOR" Method:
Debits:
Expenses
Assets
Losses (not covered yet)
Credits:
Owner's Equity
Liabilities
Revenues
The Balance Sheet Memory Aid:
ASSETS = LIABILITIES + OWNER'S EQUITY
(Debit) (Credit) (Credit)
The "Opposite Rule" for Owner's Equity Sub-accounts:
Withdrawals & Expenses = DEBIT (opposite of Owner's Equity)
Capital & Revenues = CREDIT (same as Owner's Equity)
📝 JOURNAL ENTRY RULES (MASTER THESE!)
Format Requirements:
1. Date - Listed on debit line ONLY
2. Debit accounts listed FIRST
3. Credit accounts INDENTED
4. Debit amounts go in debit column
5. Credit amounts go in credit column
6. Total debits MUST equal total credits
Standard Journal Entry Format:
Date Account Name Debit Credit
Debit Account Name XXX
Credit Account Name XXX
🚨 CRITICAL RULE:
Every journal entry must have:
At least ONE debit
At least ONE credit
Total debits = Total credits
Impact at least TWO accounts
📋 TRANSACTION ANALYSIS PROCESS (4-STEP METHOD)
Step 1: Identify the accounts involved
Step 2: Classify each account type (Asset, Liability, etc.)
Step 3: Determine if each account increases or decreases
Step 4: Apply debit/credit rules based on account type
Example Walkthrough:
Transaction: Purchased equipment for $5,000 cash
Step 1: Accounts = Equipment, Cash Step 2: Equipment = Asset, Cash = Asset
Step 3: Equipment increases, Cash decreases Step 4: Equipment (Asset increase)
= DEBIT, Cash (Asset decrease) = CREDIT
Journal Entry:
Equipment 5,000
Cash 5,000
🏪 COMMON ACCOUNT TYPES & NORMAL BALANCES
Asset Accounts (DEBIT Normal Balance):
Cash
Accounts Receivable
Supplies
Equipment
Land
Liability Accounts (CREDIT Normal Balance):
Accounts Payable
Notes Payable
Salaries and Wages Payable
Interest Payable
Unearned Service Revenue
Owner's Equity Accounts (CREDIT Normal Balance):
Owner's Capital
Service Revenue
Rent Revenue
Interest Revenue
Accounts that DECREASE Owner's Equity (DEBIT Normal Balance):
Owner's Drawing
Salaries and Wages Expense
Interest Expense
Rent Expense
Utilities Expense
📊 THE GENERAL LEDGER SYSTEM
What is the General Ledger?
Collection of ALL company accounts
Shows balance in each account
Tracks changes in account balances
Source for financial statements
Posting Process (Journal → Ledger):
1. Record transaction in Journal (chronological order)
2. Post to individual T-accounts in General Ledger
3. Calculate new account balances
4. Prepare Trial Balance
✅ TRIAL BALANCE (The Big Test!)
Purpose:
Lists ALL ledger accounts and their balances
Tests equality of debits and credits
Proves the accounting equation balances
Format:
Company Name
Trial Balance
Date
Account Name Debit Credit
Cash XXX
Equipment XXX
Accounts Payable XXX
Owner's Capital XXX
Service Revenue XXX
Rent Expense XXX
TOTALS XXX XXX
🚨 CRITICAL RULES:
Each account appears ONLY ONCE
Show balance in NORMAL balance column only
Total debits MUST equal total credits
If totals don't match = ERROR in posting
🎯 EXAM SUCCESS STRATEGIES
Quick Decision Tree for Debits/Credits:
1. What type of account is it?
2. Is the account increasing or decreasing?
3. Apply the normal balance rule
Common Exam Traps:
1. Withdrawals - These are DEBITS (not credits like capital)
2. Unearned Revenue - This is a LIABILITY (credit)
3. Prepaid Expenses - These are ASSETS (debit)
4. Equipment purchases - Debit Equipment, Credit Cash/Payable
Memory Checks:
Assets & Expenses start with vowels = DEBIT
Liabilities, Owner's Equity, Revenues = CREDIT
Withdrawals are the "odd one out" in Owner's Equity = DEBIT
🔥 PRACTICE PATTERNS
Transaction Type 1: Cash Transactions
Received cash for services: Debit Cash, Credit Revenue
Paid cash for expenses: Debit Expense, Credit Cash
Owner withdrew cash: Debit Withdrawals, Credit Cash
Transaction Type 2: Credit Transactions
Bought on account: Debit Asset/Expense, Credit Accounts Payable
Performed services on credit: Debit Accounts Receivable, Credit Revenue
Transaction Type 3: Mixed Transactions
Collected receivables: Debit Cash, Credit Accounts Receivable
Paid payables: Debit Accounts Payable, Credit Cash
🏆 WEEKLY SUCCESS CHECKLIST
Before Each Exam:
✅ Can I identify normal balances for all account types?
✅ Can I determine debits/credits for any transaction?
✅ Do I know proper journal entry format?
✅ Can I post from journal to ledger?
✅ Can I prepare a trial balance?
✅ Do my trial balance totals always match?
Key Formulas to Memorize:
Assets = Liabilities + Owner's Equity
Total Debits = Total Credits (in every entry)
Account Balance = Beginning Balance +/- Changes
🚨 CRITICAL REMINDERS
Journal Entry Must-Haves:
1. At least one debit and one credit
2. Debits listed first (not indented)
3. Credits indented
4. Total debits = Total credits
5. Date on first line only
Account Balance Rules:
Normal balance side = where increases go
Opposite side = where decreases go
Never show negative balances in trial balance
Posting Accuracy:
Every journal entry must be posted to general ledger
Check your math after each posting
Trial balance is your final accuracy check
Master these concepts and Week 2 will be your foundation for everything else
in ACC100!
