Pearson New International Edition International pcl tp indd 1

Asset accounts
Liability accounts
Owner’s equity accounts
Cash on hand
Accounts payable
Stock
Funds in bank accounts
Taxes payable
Retained earnings
Accounts receivable
Short-term debts (notes) payable
Revenue accounts
Inventories
Long-term debts payable
Expense accounts
Land
Buildings
Equipment
Furniture
GUEST CHARGES, PAYMENT, AND CHECK-OUT
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GUEST CHARGES, PAYMENT, AND CHECK-OUT
FRONT OFFICE SEMANTICS
Debit (accounting):
Accounting transaction that records a change on the left side of a T account in an
asset, liability, or owner’s equity account.
Credit (accounting):
Accounting transaction that records a change on the right side of a T account in
an asset, liability, or owner’s equity account.
When double entry accounting is used, the total of the debits (changes made to
the left side of one or more accounts) always equals the credits (changes made to the
right side of one or more accounts). This ensures that the fundamental accounting
formula stays in balance. Figure 5 summarizes the impact of each kind of entry—
debit and credit—on each of the three major components of the fundamental
accounting formula.
Let’s see how the use of debits, credits, and double entry accounting affects indi-
vidual accounts. Assume that the Altoona Hotel has an account titled “Uniforms”
and another called “Cash on Hand.” When the FOM purchases uniforms for front
office staff, this transaction involves debiting Uniforms (an asset) and crediting Cash
on Hand. As seen in Figure 5, this increases the value of the Uniforms account 
and decreases the amount of money in the Cash on Hand account.
To see how credits, debits, and double entry accounting affect the fundamental
accounting formula, assume that the Altoona’s financial condition is as follows:
(Assets)
=
(Liabilities)
+
(Owner's equity)
$13,000,000
=
$10,000,000
+
$3,000,000
FIGURE 4
T account.
Name of Account
Left
(debit)
Right
(credit)
FIGURE 5
Impact of debit and credit entries on the accounting formula.