Scribd
Upload
11 views

Chapter 2

Uploaded by

Suba Chalu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
11 views

Chapter 2

Uploaded by

Suba Chalu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 15

Chapter 2

The Double Entry System for


Assets, Liabilities and Capital
Objectives
 Explain what is meant by ‘double entry’

 Explain how the double entry system follows the


rules of the Accounting equation

 Explain why each transaction is recorded into


individual accounts

 Describe the layout of a ‘T-account’


Objectives
 Explain what is meant by the terms debit & credit

 Explain the phrase ‘debit the receiver & credit the


giver’

 Prepare a table showing how to record increase and


decreases of assets, liabilities and capital in the
accounts

 Enter a series of transactions into T-accounts


Nature of Transactions
 You saw how various events had changed 2 items
in the B/S

 Events which result in such changes are known as


transactions

 If the proprietor asks the price of some goods, and


 Does not buy them – there is no transaction!
 Buys them – there is a transaction! – 2 B/S items will have
to be altered..
The Double Entry System
 Every transaction affects 2 items

 We need to show these effects when we 1st record each


transaction – only those items are shown as having
changed

 This process is called – double entry OR double entry


bookkeeping – each entry is made twice!

 The double effect shows the effect of each transaction on


each of the 2 items it affects
 1st entry – decrease / increase in an item
 2nd entry – decrease / increase in an item
The Double Entry System
 The transactions that occur are entered in a set of
accounts

 An account – a place where all the info referring to a


particular asset / liability / capital is recorded

 Ex – an account where all info concerning off


equipment will be entered
The Accounts for Double Entry
 Each acc should be shown on a separate page in the accounting
books

 Double entry sys divides each page into 2 halves

Title of account written here

Left-hand side of the page – Right-hand side of the page –


This is the ‘debit’ side This is the ‘credit’ side

 Do you see how the shape resembles a ‘T’? These are commonly
referred to T-accounts
The Accounts for Double Entry
 Ex – You paid $100 by cheque for a table:
 Debit the table acc with $100
 Credit the bank acc with $100

 To make an entry:

Table account Bank account

$ $
100 100
The Accounts for Double Entry
 Transactions increase / decrease assets, liabilities or capital

Accounts To record Entry in the acc

Assets An increase Debit


A decrease Credit
Liabilities An increase Credit
A decrease Debit
Capital An increase Credit
A decrease Debit
The Accounts for Double Entry
 Let’s look at the accounting equation:

Capital = Assets - Liabilities

To increase each item Credit Debit Credit


To decrease each item Debit Credit Debit
The Accounts for Double Entry
 Let’s look at the accounts:
Capital account Any Asset account

Decreases Increases Increases Decreases


- + + -

Any Liability account

Decreases Increases
- +
Worked Examples
 Let’s
look at some examples..
Example 1

Let’s try Review Questions 2.1, Page 26


A Further Worked Example
 Let’s look at Example 2
Abbreviation of ‘limited’
 Limited companies use the abbreviation ‘Ltd’

 Some limited companies use ‘plc’ which is


‘public limited company’ instead of Ltd
Tutorials..
 Review Questions: 2.2A, 2.5A, 2.6A

 Answers will be discussed in the next class

 Please attempt other questions as well..


It is for your own benefit..

 You will be given a Quiz on this chapter in the next


class, kindly revise.. TQ =)

You might also like