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    Double Entry Bookkeeping

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    Canduman Nhs
    The document discusses the system of double-entry bookkeeping that accountants use to record financial transactions, in which every transaction has two equal and offsetting effects. It explains key concepts like debits, credits, journals, ledgers, and accounts, and provides examples of how accounting entries are made for common business transactions like purchasing inventory, selling goods, and contributing capital. The document also includes sample charts of accounts and exercises for practicing entering accounting transactions.

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    Double Entry Bookkeeping

    Uploaded by

    Canduman Nhs
    130 views19 pages
    The document discusses the system of double-entry bookkeeping that accountants use to record financial transactions, in which every transaction has two equal and offsetting effects. It explains key concepts like debits, credits, journals, ledgers, and accounts, and provides examples of how accounting entries are made for common business transactions like purchasing inventory, selling goods, and contributing capital. The document also includes sample charts of accounts and exercises for practicing entering accounting transactions.

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    The document discusses the system of double-entry bookkeeping that accountants use to record financial transactions, in which every transaction has two equal and offsetting effects. It explains key concepts like debits, credits, journals, ledgers, and accounts, and provides examples of how accounting entries are made for common business transactions like purchasing inventory, selling goods, and contributing capital. The document also includes sample charts of accounts and exercises for practicing entering accounting transactions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    130 views19 pages

    Double Entry Bookkeeping

    Uploaded by

    Canduman Nhs
    The document discusses the system of double-entry bookkeeping that accountants use to record financial transactions, in which every transaction has two equal and offsetting effects. It explains key concepts like debits, credits, journals, ledgers, and accounts, and provides examples of how accounting entries are made for common business transactions like purchasing inventory, selling goods, and contributing capital. The document also includes sample charts of accounts and exercises for practicing entering accounting transactions.

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    CP-TLE 04

    DOUBLE - ENTRY
    BOOKKEEPING
    THE SYSTEM THAT ACCOUNTANTS
    USE TO RECORD FINANCIAL DATA
    THE SYSTEM RECOGNIZES THAT EVERY
    TRANSACTION HAS A TWOFOLD EFFECT

    SO IF I LOAN YOU
    P100,000.00, A TWOFOLD
    EFFECT ARISES BECAUSE:
    I GIVE YOU SOME
    MONEY AND YOU
    RECEIVE IT.

    THE TWOFOLD EFFECTS ON BOTH PARTIES

    THE EFFECT ON YOU:


    (1) YOUR CASH GOES UP BY P10K AND
    (2) WHAT YOU OWE ME ALSO GOES UP BY
    P100K

    THE EFFECT ON ME:


    (1) MY CASH GOES DOWN BY P100K AND
    (2) WHAT I AM OWED BY YOU GOES UP BY
    P100K

    TWO LATIN WORDS THAT


    ARE USED IN ACCOUNTING
    DEBIT (MEANING TO RECEIVE, OR VALUE
    RECEIVED)

    CREDIT
    GIVEN)

    (MEANING TO GIVE, OR VALUE

    IN A DOUBLE-ENTRY
    BOOKKEEPING, THE SYSTEM IS
    ACHIEVED BY RECORDING THE
    DEBIT ENTRIES ON THE LEFT
    HAND SIDE OF THE PAGE, AND
    THE CREDIT ENTRIES ON THE
    RIGHT HAND SIDE.

    IMPORTANT TERMS TO REMEMBER


    JOURNAL - IS A RECORD THAT
    KEEPSACCOUNTINGTRANSACTIONS IN
    CHRONOLOGICAL ORDER, I.E. AS THEY OCCUR.
    LEDGER - IS A RECORD THAT KEEPSACCOUNTING
    TRANSACTIONS BY ACCOUNTS.
    ACCOUNTS - IS A UNIT TO RECORD AND
    SUMMARIZE ACCOUNTINGTRANSACTIONS.
    ACHART OF ACCOUNTS(COA) IS A CREATED LIST
    OF THEACCOUNTSUSED BY AN ORGANIZATION
    TO DEFINE EACH CLASS OF ITEMS FOR WHICH
    MONEY OR THE EQUIVALENT IS SPENT OR
    RECEIVED.

    EXAMPLE OF JOURNAL
    Date

    Account

    Page

    Debit

    Credit

    EXAMPLE OF LEDGER ACCOUNT


    Date

    Description

    Page

    DEBIT SIDE

    Amoun
    t

    Date

    Description

    Page

    Amount

    CREDIT SIDE

    SAMPLE CHART OF ACCOUNTS

    Block Assigned
    100-199
    200-299
    300-399
    400-499
    500-599
    600-699
    700-799
    800-899

    Type of Account
    Assets
    Liabilities
    Owner's Equity
    Revenues
    Costs of Goods Sold
    Expenses
    Other Revenue
    Other Expenses

    IMPORTANT TERMS IN CHART OF ACCOUNTS

    ASSETS These are possessions or resources owned by the


    entity. They include physical or tangible possessions
    such as property, plant, machinery, stock and cash and
    bank balances.
    CAPITAL this is the term used to describe the amount that the
    owners have invested in an entity.
    LIABILITIES These are the opposite of assets. They are the
    amounts owed by the entity outside parties. They
    include loans, bank overdrafts, creditors.
    DRAWINGS used to record what cash (or goods) the owner
    has withdrawn from the business for personal use.
    SALES records the value of goods sold to customers during a
    particular accounting period. The account includes cash
    and credit sales.

    ENTERING TRANSACTIONS IN
    ACCOUNTS
    WHEN ENTERING A TRANSACTION IN AN
    ACCOUNT ALWAYS MAKE SURE THAT YOU:
    DEBIT THE ACCOUNT WHICH
    RECEIVES
    AND
    CREDIT THE ACCOUNT WHICH GIVES

    TRANSACTION #1
    THE PROPRIETOR CONTRIBUTES
    SOME CASH TO THE BUSINESS
    CASH ACCOUNTS

    DEBIT

    CAPITAL ACCOUNTS

    CREDIT

    TRANSACTION #2
    A VAN IS PURCHASED FOR USE IN
    THE BUSINESS; IT IS PAID FOR CASH
    VAN ACCOUNT

    DEBIT

    CASH ACCOUNTS

    CREDIT

    TRANSACTION #3

    SOME GOODS ARE PURCHASED


    ON CREDIT TERMS FROM FRED
    PURCHASES ACCOUNT

    DEBIT

    FREDS ACCOUNTS

    CREDIT

    TRANSACTION #4

    SOME GOODS ARE SOLD FOR


    CASH
    CASH ACCOUNT

    DEBIT

    SALES ACCOUNTS

    CREDIT

    PRACTICE EXERCISE
    ADAM HAS JUST GONE INTO BUSINESS. THE
    FOLLOWING IS A LIST OF HIS TRANSACTIONS
    FOR THE MONTH OF JUNE 2014
    A. Cash paid into the business by Adam
    B. Goods for resale purchased on cash terms
    C. Multicab bought for cash
    D. One quarters rent for premises paid in cash
    E. Some goods sold on cash terms
    F. Adam buys some office machinery for cash
    Note: State which account in Adams books of account should be
    debited and which account should be credited for each transaction.

    ANSWER
    TRANSACTIONS
    Cash paid into the business by
    Adam.
    Goods for resale purchased on
    cash terms
    Multicab bought for cash
    One quarters rent for
    premises paid in cash
    Some goods sold on cash
    terms
    Adam buys some office

    DEBIT (+)

    CREDIT()

    Cash

    Capital

    Purchases

    Cash

    Multicab

    Cash

    Rent

    Cash

    Cash

    Sales

    Machinery

    Cash

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