In this video we begin to look at the chart of accounts a little more closely and review what we covered last video, such as the diffetent types of accounts:

-Income-Revenue
-Expenses
-Assets
-Liabilities
-Equity

I also introduce T accounts, which is basically a visual representation of a particular account. Accounting is a system of debits and credits. on the T account, debits are on the left, while credits are on the right. Depending on the type of account, a debit may increase or decrease that acoount. Likewise, the same holds true for credits.

With debits, think of D.E.A.L:

-Dividends
-Expenses
-Assets
-Losses

Generally, dividends, expenses, assets, and losses are increased with a debit and decreased with a credit

With Credits, think of G.I.R.L.S:

-Gains
-Income
-Revenue
-Losses
-Stockholders/owner equity

Generally, gains, income, revenue, losses, and stockholders-member equity will increase with a credit and decrease with a debit

Also, consider contra accounts which operate “contrary” to their main account counterparts. Examples are “allowance for bad debts” as a contra to accounts receivable and “discounts” as a contra to income-revenue

In our next video we will use T accounts to record transactions and begin to see how they shape our financial statements.