Step 1-2.

Analyzing
means that the accountant

determines the impact of the transaction on the financial positionor balance sheet
as represented by the basic equation �asset equals liabilities plus equity�.

Rules of Debit and Credit

Debits and credits are the opposing sides of an accounting journal entry. They are
used to change theending balances in the general ledger accounts. The rules
governing the use of debits and credits in a journalentry are as follows: A
debit or debit entry
is used to indicate:
?
An increase in asset,
?
A decrease in liability,
?
A decrease in equity,
?
An increase in an expense (or loss),
?
A decrease in income (a revenue or gain). A
credit or credit entry
is used to indicate:
?
An increase in liability,
?
A decrease in equity,
?
A decrease in asset,
?
A decrease in expense (or loss),
?
An increase in income (a revenue or gain).