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Accounting At Your Fingertips, 2e by George Murray, CPA.

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2.3 Analyzing Transactions

Understanding Debits and Credits

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Before any activity can be properly recorded, transactions must be analyzed to determine what accounts they affect. In this subchapter, you learn about debits and credits and the importance of recording transactions in the proper period.

Understanding Debits and Credits

In accounting, every transaction affects at least two accounts—increasing one and decreasing the other. This is the basis for the double entry bookkeeping and the first step in analyzing any transaction.

SEE ALSO 1.1, “Accounting Basics”

SEE ALSO 1.4, “Establishing the Chart of Accounts”

For example, if you paid $1,500 to buy two new laptops for your company on January 5, your cash account would decrease ...

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