Accounting Chapter 4 Teacher Notes
Chart of Accounts
A Chart of Accounts is a list of all accounts used by a business.
• Asset accounts begin with 1.
• Liability accounts begin with 2.
• Owner’s equity accounts begin with 3.
• Revenue accounts begin with 4.
• Expense accounts begin with 5.
Sample Chart of Accounts (COA) Balance Sheet Accounts
Income Statement Accounts
(100) Assets
110 Cash
120 Petty Cash
130 AR Thing 1
131 AR Thing 2
132 AR Mary Poppins
140 Office Supplies
145 Sales Supplies(400) Revenue
410 Sales
(200) Liabilities
210 Homer Simpson Homes
220 Winnie the Pooh Water(500) Expenses
510 Advertising Expense
515 Automobile Expense
530 Catering Expense
540 Rent Expense
550 Salary Expense
570 Utility Expense(300) Owner's Equity
310 My Money, Capital
320 My Money, Drawing
Double-Entry Accounting
Record keeping that involves two entries for each business transaction.
Using T Accounts:
A T account is "an accounting device used to analyze transactions".
T-Account |
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Left side |
Right side |
Account Balances
Normal balance is that side of the account you increase when you post a deposit, or increase to that account.
Analyzing how transactions affect accounts:
Chart of accounts: a numbered list of accounts used by a business
Visit the NetMBA Website for detailed information about a Chart of Accounts.
Questions for analyzing transactions:
Recording Transactions:
Received Cash from owner as an investment: changes assets and OE (capital)
Cash – increase (debit)
Capital – increase (credit)
Paid cash for supplies: changes 2 asset accounts
Supplies – increase (debit)
Cash – decrease (credit)
Paid cash for insurance: changes 2 asset accounts
Prepaid Insurance – increase (debit)
Cash – decrease (credit)
Bought supplies on account: changes one asset and one liability account
Supplies – increase (debit)
Accounts Payable – increase (credit)
Paid cash on account: changes one asset and one liability account
Accounts Payable – decrease (debit)
Cash - decrease (credit)
Received cash from sales: changes assets and OE
Cash – increase (debit)
Sales – increases OE (credit)
Sold services on account: changes assets and OE
Accounts Receivable – increase (debit)
Sales – increases OE (credit)
Paid cash for an expense: changes one asset account and OE
Expense – decreases OE (debit)
Cash – decrease (credit)
Paid cash for an expense: changes one asset account and OE
Expense – decreases OE (debit)
Cash – decrease (credit)
Received cash on account: changes two asset accounts
Cash – increase (debit)
Accounts Receivable – decrease (credit)
Paid cash to owner for personal use: changes one asset account and OE
Drawing – decreases OE (debit)
Cash – decrease (credit)