COMM 293 Chapter Notes - Chapter 2: Financial Statement, The Ledger, Dollar Sign
Document Summary
An account is an individual accounting record of increases and decreases in a specific asset, liability, or stockholders" equity item. For example, softbyte inc. (the company discussed in chapter 1) would have separate accounts for cash, accounts receivable, accounts payable, service revenue, salaries and wages expense, and so on. In its simplest form, an account consists of three parts: (1) a title, (2) a left or debit side, and (3) a right or credit side. Because the format of an account resembles the letter t, we refer to it as a t-account. The term debit indicates the left side of an account, and credit indicates the right side. We use the terms debit and credit repeatedly in the recording process to describe where entries are made in accounts. For example, the act of entering an amount on the left side of an account is called debiting the account. Making an entry on the right side is crediting the account.
