Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

TIPS ON CHAPTER TOPICS

TIP: An account is an individual accounting record of increases and decreases in a specific asset, liability, owner's capital, revenue, or expense item. An account consists of three parts: (1) the title of the account, (2) a left or debit side, and (3) a right or credit side. In classrooms and in textbooks, we refer to this as a T-account. We need a separate account for each item reported in the company's financial statements. When we refer to a specific account (such as Cash or Accounts Payable or Service Revenue), we capitalize its name.

The basic form of any T-account is as follows:

Periodically, the accounts are totaled to arrive at balances. For each account, the amounts entered on the debit side are totaled, and the amounts entered on the credit side are separately totaled. The difference between these two totals is the account's balance; the balance appears on the side that has the greater total.

TIP: To journalize or journalizing refers to the process of recording a transaction or event in a journal. To post or posting refers to the transferring of information from journal entries to the appropriate ledger accounts. The posting phase of the recording process accumulates the effects of journalized transactions in the individual accounts.

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