Double Entry

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Double Entry System
DR
CR
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Accounting Equation
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Assets Owners Equity Liabilities
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Assets Owners Equity Liabilities
Explain these terms to students
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Assets Owners Equity Liabilities
Every transaction will affect 2 items. The
equation will still balance!
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A OE L
TRANSACTION THAT AFFECTS BOTH ASSET
AND LIABILITY
ASSET ? LIABILITY ?
ASSET ? LIABILITY ?
TRANSACTION THAT AFFECTS BOTH ASSET
AND OWNERS EQUITY
ASSET ? OWNERS EQUITY ?
ASSET ? OWNERS EQUITY ?
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A OE L
TRANSACTION THAT AFFECTS ASSETS ONLY
ASSET ? ASSET ?
TRANSACTION THAT AFFECTS
LIABILITIES ONLY
LIABILITY ?
LIABILITY ?
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Examples
A OE L
a) John began business with cash in hand 5000.
Cash ?5000 Capital ?5000

• The firm took a bank loan of 8000.

Cash ?8000 Bank Loan ?8000

• Being purchase of motor vehicle from
  
• ABC Trading for 2000.

Motor Vehicle ?2000 Cash ?2000
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Examples
A OE L
d) Being payment of 500 to Creditor, Peter.
Cash ? 500 Creditors ? 500
e) Being receipt of 3500 in cheque from a
debtor.
Debtors ? 3500 Cash at Bank ?3500
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Examples
A OE L
f) Being repayment of bank loan for 1500.

Cash ? 1500 Bank Loan ? 1500
g) Being purchase of office equipment from
Lee Trading on credit for 780.
Office Equipment ?780 Creditors?780

(Lee Trading)
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ACCOUNTING EQUATION
Assets Owners Equity
Liabilities
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What is a Balance Sheet?
It is a report that is used to present the
Accounting Equation that involves a firms
total assets, total owners equity and total
liabilities of an accounting period. It is a
report that external parties like investors or
bankers look at when making important business
decisions. How does it look like?
Click me!
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Assets Owners Equity
Liabilities
BALANCE SHEET AS AT 1 Jan
2000
Owners Equity Capital
Add Profits Less Drawings
Long Term Liabilities Loan from bank
Current Liabilities Creditors
Other creditors
Fixed Assets Building
Office Equipment Motor Vehicle
Fixtures Current Assets Stock (closing)
Debtors Bank Cash



Same figure
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A OE L
2000
2000
a) Owner brought in cash 2000 as additional
capital
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- 1000
- 1000
b) Owner paid off the loan 1000
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- 1100
- 1100
c) Owner paid creditors 1100
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IN CLOSING