Accounting and Finance Foundations

Unit 5

Accounting and Finance Foundations Unit 5: Accounting Terminology 350

Accounting Terminology

Chapter 14

Transaction 2

Paid cash for supplies, $300

When we look at the three questions discussed earlier, we see

a. The two accounts affected are Cash and Supplies.

b. Cash and Supplies are both assets.

c. Cash decreases.

Supplies increase.

We see from the accounting equation that we decrease Cash by $300, and since Cash is an asset and on

the left side of the accounting equation, when we are using T accounts, we place the $300 on the credit

side of the Cash account as seen below. The second part of the transaction is an increase to Supplies, since

Supplies is an asset and on the left side of the accounting equation. We increase supplies by putting $300

on the left side or debit side of the T account. Notice, we ALWAYS have equal debits and credits.

Assets = Liabilities + Owner’s Equity

Supplies

Debit Credit

+ –

300.00

Cash

Debit Credit

+ –

300.00

Assets = Liabilities + Owner’s Equity

Trans.
No.

Cash + Supplies + Accounts

Receivable,

Lisa Cook

+ Prepaid

Insurance

= Accounts

Payable/

Office

Supply

+ Your

Name,

Capital

+ Revenue - Expenses - Drawing

1. 7500 + + + * + 7500 + - -


2. -300
   7200

+ +300 + + - + 7500 + - -

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