8/12/2019 DebitCreditRules and AccountTitles

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Financial Accounting Franco Wong

Rules of debit and credit (or left and right):*

Asset (A) = Liability (L) + Equity (E)

+ + +

Revenue / Gain# Dividend# Expense / Loss#

+ + +

* Hints: (1) The rules for L & E are opposite to that for A; (2) Since revenue and gain increase equity, the rules for Revenue and Gain are the same asthat for Equity; and (3) Since dividend, expense, and loss reduce equity, the rules for Dividend, Expense, and Loss are opposite to that for Equity.

#Revenue, gain, dividend, expense, and loss accounts are temporary accounts that will be closed to Retained Earnings at the end of the accounting

period. The closing procedure will not be covered in this course.

Common account titles:

Asset Liability Equity Revenue / Gain Expense / Loss

Cash and cash equivalents

Liquid funds

Accounts payable

Trade payable

Common stock

Common share

Share capital

Sales

Revenues

Turnover

Cost of sales

Cost of goods sold

Cost of merchandise

Marketable securities

Short-term investments

Notes receivable

Other payables:

Wages/salaries payable

Interest payable

Utilities payableNotes payable

etc.

Additional paid-in capital

Share premium

Contributed surplus

Operating items:

Share of profits of associates

Equity-method inv. income

Gain from sale of PPE

Operating items:

Wage/salary expense

Selling/marketing expense

Depreciation and amortizationResearch expense

Tax expense

Share of losses of associatesEquity-method inv. loss

Loss from sale of PPE

Loss on impairment

Prepaid expenses:

Pre-paid advertising

Pre-paid insurance

Pre-paid rentetc.

Accrued expenses:

Accrued interest

Accrued wages/salaries

Accrued utilitiesetc.

Treasury stock3

Treasury share3Non-operating items:

Interest income

Finance income

Dividend incomeGain from sales of financial assets

Non-operating items:

Interest expense

Finance charges/costsLoss from sales of financial assets

Accounts receivable

Trade receivable

Deferred revenue

Unearned revenue

Retained earnings

Retained profit

Allowance for bad debt1 Provisions Non-controlling interests

Minority Interests

Inventories

Stock

Current portion of long-term debt Unrealized gain/loss on

available-for-sale securities

Property, plant & equipment

Fixed assets

Loan payable

Accumulated depreciation1 Long-term debt/bond

Long-term investments Finance leases

Capitalized lease obligation

Investments in associates

Equity-method investment

Investments in joint ventures

Intangible assets

Goodwill Preferred stock/share2

Preference stock/share2Unrealized gain/loss on derivative

instruments2

Deferred tax assets2 Deferred tax liabilities2 Cumulative translation adjustment2

Retirement benefit asset2 Retirement benefit obligation2 Retirement benefit adjustment2

1 This is a contra-asset account (i.e., it reduces asset balance).2This topic will not be covered in this course.3This is a contra-equity account (i.e., it reduces equity balance).

Copyright 2014 M.H. Franco Wong. No part of this document may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted

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