Basic Accounting Info Cheat Sheet

All the basics you should memorize so life is easier later

Normal Balance: Assets

Debit

Normal Balance: Expenses

Debit

Normal Balance: Dividends

Debit

Normal Balance: Liabilities

Credit

Normal Balance: Equity

Credit

Normal Balance: Revenue

Credit

ADE=

Normal Debit, Increase with Debit

LER=

Normal Credit, Increase with Credit

Word clues/Usually Means: Receivable

Asset / Someone Owes Us

Word clues/Usually Means: Payable

Liability / We Owe Someone

Word clues/Usually Means: Expense

Expense / Cost Incurred

Word clues/Usually Means: Revenue

Revenue / Money Earned

Word clues/Usually Means: Prepaid

Asset / Paid in Advance

Word clues/Usually Means: Unearned

Liability / Received cash before earning it

Word clues/Usually Means: Accumulated

Contra Asset

Word clues/Usually Means: Dividends

Equity Reduction

Assets BLANK with Debits

increase

Liabilities BLANK with Credits

increase

Revenue BLANK with Credits

increases

Expenses BLANK with Debits

increase

Common Stock BLANK with Credits

increases

What does Payable indicate?

Liability

What does Receivable indicate?

Asset

What are the four major adjusting entries?

Accrued Revenue, Accrued Expense, Deferred Revenue, Prepaid Expense

Define Accrued Revenue

Earned it, haven’t received cash

Define Accrued Expense

Incurred expense, haven’t paid cash

Define Deferred Revenue

Received cash first

Define Prepaid Expense

Paid cash first, using it over time

Adjusting Entry Set Up: Prepaid Expense (Paid cash first, using it over time)

Debit Expense, Credit Prepaid Insurance

Adjusting Entry Set Up: Deferred Revenue (Received cash first, haven’t earned it yet)

Debit Unearned Revenue, Credit Revenue

Adjusting Entry Set Up: Accrued Expense (employees worked, payday is next week)

Debit Salary Expense, Credit Salary Payable

Adjusting Entry Set Up: Accrued Revenue (Tutored someone, haven’t been paid yet)

Debit AR, Credit Service Revenue

What do you ask for journal enteries?

What accounts changed?

What do you ask for Cash flows?

What happened to cash?

Permanent Accounts:

Stay forever: Assets, Liabilities, Common Stock, Retained Earnings (balance sheet accounts generally permanent)

Temporary Accounts:

Start over every year: Revenues, Expenses, Dividends (Income Statement = temporary)

Why are closed accounts transferred to Retained Earnings?

All the profits the company has accumulated over its lifetime that weren’t paid out as dividends

Revenues WHAT Retained Earnings

Increase (revenue increases net income)

Expenses WHAT Retained Earnings

Decrease (Expenses decrease net income)

Dividends WHAT Retained Earnings

Decrease (dividends reduce SE)

What is Income Summary?

A temporary account used during the closing process to accumulate revenues and expenses before transferring net income to Retained Earnings.