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Financial Analysis

Financial Accounting MidTerm

I. Debit vs. Credit
A. Debit
Debit = left side of T-account
On the Balance Sheet a debit indicates:
1. An increase in an asset
2. A decrease in a liability
3. A decrease in shareholders' equity item
B. Credit
Credit = Right side of T-account
On the Balance Sheet a credit indicates:
1. A decrease in an asset
2. An increase in a liability
3. An increase in shareholders' equity item

** HINT** - Identify two components of each transaction: 1.) what did you get; 2.) where did it come from. The debit is what you got, and the credit is the source of the item you received.

For instance, let's imagine that you purchase a computer with your credit card. Since the computer is what you received it's going to result in a debit to the asset account for your computer. The credit will be applied to the credit card liability account for the same amount.

II. What accounts Increase/Decrease with debits and credits

Account Type Debit......


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Approximate Word Count: 1205
Approximate Pages: 5 (250 words per double-spaced page)

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