STEPS IN ANALYZING

TRANSACTIONS
1. Analyze the transaction to determine the
accounts affected. ✅
2. Determine the effect of the transaction on
the accounts affected.
3. Apply the rules of debit and credit to
identify whether the accounts affected
should be debited or credited to show the
corresponding increase or decrease.
 DOUBLE ENTRY
BOOKKEEPING SYSTEM

T-ACCOUNT

RULES OF DEBIT AND

CREDIT
 DOUBLE-ENTRY
BOOKKEEPING SYSTEM
Double-entry bookkeeping, in accounting, is
a system of bookkeeping where every entry
to an account requires a corresponding and
opposite entry to a different account. The
double-entry has two equal and
corresponding sides known as debit and
credit.
 T- Account

SHAPED
Debit Credit
LIKE a “T”
 “T” Accounts
Debit means Credit means
Left Right
Debit Credit
 “T” Accounts

Abbreviation Abbreviation
for Debit for Credit
Dr. Cr.
 “T” Accounts

ACCOUNT TITLE CASH

Dr. Cr.
 Every “T” Account has:
➨An Increase Side, and The picture can't be displayed.

➨A Decrease Side
➨Some accounts
increase on the Debit
Side
➨But some accounts
increase on the
Credit Side
 RULES OF
DEBITS AND CREDITS
 Rules of debit and credit

DEBIT SIGNIFIES: CREDIT SIGNIFIES:

+ Assets - Assets

- Liabilities + Liabilities

Drawing Capital

Expenses Revenue
 Rules of debit and credit

DEBIT SIGNIFIES: CREDIT SIGNIFIES:

+ Assets - Assets

- Liabilities + Liabilities

- Owner’s Equity + Owner’s Equity

Rules of debit and credit (Easier version)

DEBIT SIGNIFIES: CREDIT SIGNIFIES:

+ Assets - Assets

- Liabilities + Liabilities

Drawing Capital

Expenses Revenue
 RULE #1
ASSET ACCOUNTS
Increase on Decrease on
Debit Side Dr. Cr. Credit Side
+
 EXAMPLE:

PURCHASED OFFICE
SUPPLIES FOR P1,800 CASH
 STEP #1
Name the accounts affected:

CASH OFFICE
SUPPLIES
 STEP #2
Determine Classification of Accounts
AS
SE
T
ASSE
T
CASH OFFICE
SUPPLIES
PURCHASED OFFICE SUPPLIES
FOR P1,800 CASH

Did Office Supplies

increase or decrease
in this transaction?
 INCREASED

OFFICE SUPPLIES
DR. CR.
P1,800
PURCHASED OFFICE SUPPLIES
FOR P1,800 CASH

What about Cash?

DECREASED

CASH
DR. CR.

P1,800
 RULE #2

IN EVERY TRANSACTION,
DEBIT MUST EQUAL CREDIT
 DEBITS = CREDITS

SUPPLIES CASH
DR. CR. DR. CR.
P1,800 P1,800
 RULE #3
LIABILITY ACCOUNTS

Decrease on Increase on
Debit Side Dr. Cr. Credit Side
+
 EXAMPLE:
PURCHASED EQUIPMENT ON
ACCOUNT FOR P23,000.
 STEP #1
Name the accounts affected:

EQUIPMENT ACCOUNTS
PAYABLE
 STEP #2
Determine Classification of Accounts:
A LIA
SS B ILIT
ET Y
ACCOUNTS
PAYABLE
EQUIPMENT
PURCHASED EQUIPMENT ON
ACCOUNT FOR P23,000.

Did equipment
increase or decrease
in this transaction?
INCREASED

EQUIPMENT
DR. CR.
P23,000
 INCREASED

ACCOUNTS PAYBLE
DR. CR.
P23,000
 DEBITS = CREDITS

EQUIPMENT ACCOUNTS PAYABLE

DR. CR. DR. CR.
P23,000 P23,000
 RULE #4
CAPITAL ACCOUNT

Increase on
Dr. Cr. Credit Side
+
 EXAMPLE:
MARY ADAMS, THE OWNER,
INVESTED P250,000 IN THE
BUSINESS
 STEPS #1 & 2
Name and classify the accounts affected:
OWNER’S EQUITY ASSET

M. ADAMS, CAPITAL CASH

DR. CR. DR. CR.
INCREASED OR DECREASED?

INCREASED INCREASED

M. ADAMS, CAPITAL CASH

DR. CR. DR. CR.
P250,000 P250,000
 DEBITS = CREDITS

CASH M. ADAMS, CAPITAL

DR. CR. DR. CR.
P250,000 P250,000
 RULE #5
DRAWING ACCOUNT

Dr. Cr.
XX,XXX
 EXAMPLE:
MARY WITHDREW P15,000
FOR PERSONAL EXPENSES
 STEPS #1 & #2
Name and classify the accounts affected:
OWNER’S EQUITY ASSET

M. ADAMS, DRAWING CASH

DR. CR. DR. CR.
 INCREASED DECREASED

M. ADAMS, DRAWING CASH

DR. CR. DR. CR.
P15,000 P15,000
 DEBIT = CREDIT

M. ADAMS, DRAWING CASH

DR. CR. DR. CR.
P15,000 P15,000
 RULE #6
REVENUE ACCOUNTS

Increase on
Dr. Cr. Credit Side
+
 EXAMPLE:
MARY PERFORMED SERVICES
AND RECEIVED P10,000 IN CASH.
 STEPS #1 & #2
Name and classify the accounts affected:
REVENUE ASSET

SERVICE REVENUE CASH

DR. CR. DR. CR.
INCREASED OR DECREASED?

INCREASED INCREASED

SERVICE REVENUE CASH

DR. CR. DR. CR.

P10,000 P10,000
 DEBIT = CREDIT

CASH SERVICE REVENUE

DR. CR. DR. CR.
P10,000 P10,000
 EXAMPLE:
MARY PERFORMED P6,000 OF
SERVICES ON ACCOUNT
 DEBIT = CREDIT
ACCOUNTS SERVICE
RECEIVABLE REVENUE
DR. CR. DR. CR.
P6,000 P6,000

ACCOUNTS
RECEIVABLE
INSTEAD OF
CASH
 RULE #7
EXPENSE ACCOUNTS

Dr. Cr.
XX,XXX
 EXAMPLE

MARY ADAMS PAID HER

ASSISTANT P17,500.
 STEPS 1 & 2
Name and classify the accounts affected:
EXPENSE ASSET

SALARIES EXPENSE CASH

DR. CR. DR. CR.
INCREASED OR DECREASED?

INCREASED DECREASED

SALARIES EXPENSE CASH

DR. CR. DR. CR.
P17,500 P17,500