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1、RecordingTransactions79Wecannowexpressthefinalformoftherulesofdebitandcredit.Youshouldnotproceeduntilyouhavelearnedtheserules.Forexample,youmustrememberthat:■Adebitincreasesanassetaccount.■Acreditdecreasesanasset.Liabilitiesandshareholders’equityaretheopp
2、osite:■Acreditincreasesaliability,aswellasashareholders’equityaccount.■Adebitdecreasesaliability,aswellasashareholders’equityaccount.IfyoulookatthecomponentsofequityinExhibit2-6,youwillnoticethatDividendsandExpenseaccountsare“contra”accounts,i.e.thebigger
3、theyare,thesmallerthetotalequitywillbe.Thus,increasesindividendsandexpensesarerecordedasdebitsbecausetheywillultimatelyreduceequity.Remember:■Acreditincreasesincome,whichwillultimatelyincreaseequity.■Adebitdecreasesincome,whichwillultimatelyreduceequity.■
4、Adebitincreasesdividendandexpense,whichwillultimatelyreduceequity.■Acreditdecreasesdividendandexpense,whichwillultimatelyincreaseequity.Exhibit2-7showsthefinalformofthedebitandcreditrules.Exhibit2-7
5、FinalFormoftheRulesofDebitandCreditRecoRdingTRansacTions
6、Accountantsuseachronologicalrecordoftransactionscalledajournal.Thejournal-OBJECTIVEizingprocessfollowsthreesteps:Recordtransactionsinthe3journal1.Specifyeachaccountaffectedbythetransactionandclassifyeachaccountbytype(asset,liability,shareholders’equity,in
7、come,orexpense).2.Determinewhethereachaccountisincreasedordecreasedbythetransaction.Usetherulesofdebitandcredittoincreaseordecreaseeachaccount.3.Recordthetransactioninthejournal,includingabriefexplanation.Thedebitsideisalwayslistedfirst,enteredintheleftma
8、rgin,andthecreditsidefollowsandisshownindentedtotheright.Step3isalsocalled“makingthejournalentry”or“journalizingthetransaction.”Let’sapplythestepstojournalizethefirsttransactionofShineBriteCarWash.M02_HARR6339_09_SE_C02.indd7917/05/1311:41AM
