Get Accy 161 Midterm Exam #2 - Form Aanswer Key October 28 ...

Debits increase asset or expense accounts, while credits increase liabilities, equity, and revenue accounts. Every transaction requires a debit to one or more accounts and a matching credit to others for the books to balance.

The account used to summarize the Owner's Equity or O.E. in a business is called Capital. The Capital account is an O.E. account.

Keeping accurate journal entries can help accountants prepare and analyze balance sheets and income statements. The multiple types of journal entries may include: Simple journal entries: Include one debit and one credit. Compound journal entries: Include over two accounts or over one credit and one debit.

The Posting Reference (PR) column is filled when the journal entry balances are posted to the subsequent ledger accounts. Therefore, it is a cross-reference between the journal and the ledger. The PR column points to the page number or line number in the journal where a transaction was entered.

Assets and expenses have natural debit balances. This means that positive values for assets and expenses are debited and negative balances are credited.

Double-entry accounting is a bookkeeping system that requires two entries — one debit and one credit — for every transaction.

The main accounts that influence owner's equity include revenues, gains, expenses, and losses. Owner's equity will increase if you have revenues and gains. Owner's equity decreases if you have expenses and losses. If your liabilities become greater than your assets, you will have a negative owner's equity.

Debits increase asset, loss and expense accounts; credits decrease them. Credits increase liability, equity, gains and revenue accounts; debits decrease them.

A compound journal entry is an entry involving more than two accounts. In a compound journal entry, there are two or more debits, credits, or both. Rather than making separate journal entries for the same transaction, you can combine the debits and credits under one entry.