A. Transaction: Any event that affects financial position and is recorded. Transactions affect both sides of the accounting equation.

B. Transactions are recorded in accounts called “T Accounts”

Balance Sheet Items

1. Assets accounts

a. Increases recorded on the left side (Debit side)
b. Decreases recorded on the right side (Credit side)

2. Liability accounts

a. Increases recorded on the right side (Credit side)
b. Decreases recorded on the left side (Debit side)

3. Owners’ Equity accounts

a. Increases recorded on the right side (Credit side)
b. Decreases recorded on the left side (Debit side)

Income Statement Items

4. Expenses

a. Increases recorded on the left side (Debit side)
b. Decreases recorded on the right side (Credit side)

5. Income (Revenues)

a. Increases recorded on the right side (Credit side)
b. Decreases recorded on the left side (Debit side)