Accounting and Finance Foundations

Unit 5

Accounting and Finance Foundations Unit 5: Accounting Terminology 359

Accounting Terminology

We see from the accounting equation that we increase the amount of Cash we have on hand by $750,

and since Cash is an asset and on the left side of the accounting equation, when we are using T accounts,

we place the $750 on the debit side (left side) of the Cash account as seen below. The second part of the

transaction is a decrease to Accounts Receivable, Lisa Cook because she has paid us all or part of what she

owed us and owes us less than she did before. Since Accounts Receivable, Lisa Cook is an asset and on

the left side of the accounting equation, we decrease Accounts Receivable, Lisa Cook by putting $750 on

the credit (right side) of the T account. Notice, we ALWAYS have equal debits and credits.

Assets = Liabilities + Owner’s Equity

Cash

Debit Credit

+ –

750

Accounts Receivable, Lisa Cook

Debit Credit

+ –

750

Chapter 14

Student Guide