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2-1 Using T Accounts LO1 Show the relationship between the accounting equation and a T account. LO2 Identify the debit and credit side, the increase and decrease side, and the balance side of various accounts. LO3 Restate and apply the two rules that are associated with the increase side of an account. Analyzing the Accounting Equation LO1 transactions in the accounting equation would be cumbersome. Therefore, a separate record is commonly used for each account. The accounting equation can be represented as a T, as shown below. In Chapter 1, the effects of transactions were recorded in an accounting equation. This procedure is not practical in an actual accounting system. Because of the number of accounts used by most businesses, recording Asse Assets Assets sets ؍ Liabilities Liabilities Liabilities Left side ft The values of all things owned (assets) are on the left side of the accounting equation. The values of all equities or claims against the assets (liabilities and owner's equity) are on the right side of the accounting equation. The total of amounts on the left side of ؉ Owne s quity Owner 's Equity ner t Owner's Equity Right side t side s the accounting equation must always equal the total of amounts on the right side. Therefore, the total of all assets on the left side of the accounting equation must always equal the total of all liabilities and owner's equity on the right side. ETHICS IN ACTION Ethics Versus Morality E thics and morality—these words are often used to refer to an individual's ability to "do what is right." These synonymous English words were derived from different languages. "Ethics" is derived from Greek, and "morality" is derived from Latin. Over time, our society has given a slightly different meaning to each word. Over 100 years ago, C. C. Everett wrote, "Ethics is the science of morality." Morality is the standard of conduct that is acceptable in a society. Ethics is an organized method that relies on our morality to make moral decisions. Science students learn the scientific method—a model that guides how a proper experiment should be conducted. In the same manner, many ethical models have been 32 Chapter 2 proposed to guide individuals in applying their morality to business decisions. The following ethical model will be used in this textbook: 1. Recognize you are facing an ethical dilemma. 2. Identify the action taken or the proposed action. 3. Analyze the action. a. Is the action illegal? b. Does the action violate company or professional standards? c. Who is affected, and how, by the action? 4. Determine if the action is ethical. INSTRUCTIONS Prepare a short report that contrasts the ethical model with the scientific method. How are the models similar? How are they different? Analyzing Transactions into Debit and Credit Parts ©LUCA DI FILIPPO, ISTOCK ©GOODLUZ/SHUTTERSTOCK.COM LESSON