Prior To Beginning Work On This Discussion Read Chapt 670385

Prior To Beginning Work On This Discussion Read Chapters 1 And 2 In T

Prior to beginning work on this discussion, read Chapters 1 and 2 in the textbook. In addition, the MyLab materials listed in the Recommended Resources section this week may provide more in-depth information for this discussion (optional). Write: Make sure your response addressing the following questions is more than 200 words and that you include an in-text citation or a brief quote from the reading material where appropriate. Use the Ashford Writing Center resource Citing Within Your Paper (Links to an external site.)Links to an external site. for guidelines on properly citing sources. What accounts are included in each of the six major groups of accounts? State the normal balance of each of the six major groups. What effect does a debit and a credit have on each major group? How might an imbalance in debits and credits impact a business? The link is the book used for this class. Please cite the material used. Miller-Nobles, T. L., Mattison, B. L., & Matsumura, E. M. (2018). Horngren’s accounting (12th ed.). Retrieved from

Paper For Above instruction

The six major groups of accounts in accounting—assets, liabilities, equity, revenues, expenses, and gains or losses—each serve distinct roles in the financial reporting of a business. Assets include resources owned by a company, such as cash, accounts receivable, inventory, and equipment. Liabilities represent obligations owed to external parties, such as accounts payable, wages payable, and loans payable. Equity accounts, which include common stock and retained earnings, reflect the owners’ claims after liabilities are subtracted from assets. Revenues arise from the primary operations of a business, such as sales revenue or service income, while expenses pertain to costs incurred to generate revenues, like rent, salaries, and utilities. Gains or losses relate to peripheral or incidental transactions affecting the company’s financial position.

The normal balances of these accounts vary. Assets and expenses typically have debit balances, which increase when debits are recorded. Conversely, liabilities, equity, and revenues generally have credit balances, increasing when credits are posted. Gains or losses can vary depending on the specific transaction. A debit increases asset and expense accounts but decreases liabilities, equity, and revenue accounts, while a credit does the opposite. For example, debiting an asset account like cash increases that asset, whereas crediting a liability account such as accounts payable increases the liability (Miller-Nobles, Mattison, & Matsumura, 2018).

An imbalance between debits and credits can severely impact a business. If debits exceed credits, it may cause the accounting equation (Assets = Liabilities + Equity) to become unbalanced, which suggests potential errors in recording transactions or financial misstatements. This can lead to inaccurate financial statements, misinforming management, investors, and creditors, potentially resulting in poor decision-making or legal complications. Conversely, excessive credits over debits could indicate misallocation of resources or errors that need correction. Maintaining accurate and balanced accounts is crucial for reliable financial reporting and ensuring the business’s financial health.

References

• Miller-Nobles, T. L., Mattison, B. L., & Matsumura, E. M. (2018). Horngren’s accounting (12th ed.). Pearson.