DOUBLE ENTRY

JOURNAL ENTRY
ENTRIES DETAILS FOLIO Dr
1ST Dec Debit cash account $ 50,000
Credit capital account
(Starting of the business)
6th Dec Debit bank account $ 20,000
credit cash account
8TH Dec Debit Purchases account $ 4,000
credit cash account
9th Dec Debit RAM $ 2,000
Credit cash account
Discount received
being cash paid to Ram and discount rec'd
10TH Dec Debit cash account $ 3,000
Credit Sales account
(Good sold by the business)
12th Dec Debit cash account $ 2,000
credit Hari
15th Dec Debit Purchases account $ 4,000
Credit Cash Account
Purchased goods from Ram for the business
18th Dec Debit Wages $ 300
Credit Cash
Paid wages to employees
20th Dec Debit cash account $ 1,050
Credit Pankaj
Discount allowed
Received cash from Pankaj and allowed discount
22nd Dec Debit cash account $ 3,000
Credit Bank account
25th Dec Debit Ram $ 500
Credit bank a/c
JOURNAL ENTRY
Cr

$ 50,000

$ 20,000

$ 4,000

$ 1,980
$ 20

$ 3,000

$ 2,000

$ 4,000

$ 300

$ 1,000
$ 50

$ 3,000

$ 500
NB: 31ST entry is a personal use entry.
First step: Perform calculations needed in the Prov for BD a/c

4%
Year Debtor Provision Changes
2015 72000 2880 2880
2016 84000 3360 480
2017 80000 3200 -160
 PROVISIONS FOR BAD DEBTS A/C
31/12/2015 Bal c/d 2880 31/12/2015 P&L 2880

2880 2880

31/12/2015 Bal c/d 3360 1/1/2016 Bal b/d 2880

31/12/2016 p&L 480
3360 3360

31/12/2017 P&L 160 1/1/2017 Bal b/d 3360

31/12/2017 Bal c/d 3360
3200 3200

1/1/2018 Bal b/d 3200

 LALL'S A/C

SALES
1-Jan Bal b/d
LALL'S A/C GREENE'S A/C

85 31-Dec Bal c/d 85 Sales 104 Cash

85 31-Dec Bad Debts 85 31-Dec Bal c/d
104
1-Jan Bal b/c 84 1-Jan Bad debts

BAD DEBTS A/C

31-Dec Greene 84
31-Dec Lall 85
 20
84
104
84
NB: 5% TO BE PROVIDED FOR FROM 1990 - 1992 and 8% TO BE PROVIDED FOR IN 1993
CALCULATIONS

YEAR 1990 1991 1992 1993

DEBTOR $ 20,122 $ 24,580 $ 25,760 $ 32,328
BAD DEBTS 0 0 0 -7800
NET DEBTS $ 20,122 $ 24,580 $ 25,760 $ 24,528
SPECIFIC PRO -1750
$ 20,122 $ 22,830 $ 25,760 $ 24,528
GENERAL PRO $ 1,006 $ 1,142 $ 1,288 $ 1,962
SPECIFIC PRO $ 1,750
TOTAL PRO 1006 2892 1288 1962

NB: GENERAL PRO PLUS SPECIFIC PRO EQUALS TOTAL PRO

PROVISION FOR BAD DEBTS A/C

31-Dec-90 Bal c/d 1006 31 Dec, 1990 P&L A/C 1006

1006 1006
31/12/1991 Bal c/d 2892 1/1/1991 Bal b/d 1006
31/12/1991 P&L A/C 1886
2892 2892

31/12/1992 Ba/ cld 1288 1/1/1992 Bal b/d 2892

31/12/1992 P&L A/C 1604
2892 2892

31/12/1993 Bal c/d 1962 1/1/1993 Bal b/c 1288

31/12/1993 P&L A/C 674
1962 1962
1/1/1994 Bal b/d 1962
$ 0
YEAR 1994 1995 1996 1997
DEBTOR $ 10,000 $ 28,570 $ 23,360 $ 18,200
BAD DEBTS NIL $ (6,843) $ (3,852) $ (6,574)
NET DEBTS $ 10,000 $ 21,727 $ 19,508 $ 11,626
SPECIFIC PRO $ 500
$ 10,000 $ 21,727 $ 19,508 $ 11,126
GENERAL PRO $ 10,000 $ 1,086 $ 975 $ 556
SPECIFIC PRO $ 500
TOTAL PRO $ 10,000 $ 1,086 $ 975 $ 1,056

PROVISIONS FOR BAD DEBTS

31/12/1995 Bal c/d 1086 31/12/1995 P&L A/C 1086

1086 1086
31/12/1996 Bal c/d 975
P&L A/C 111 1/1/1996 Bal b/d 1086
1086 1086

31/12/1997 Bal c/d 1056 1/1/1997 Bal b/d 975

31/12/1997 P&L A/C 81
1056 1056

1/1/1998 Bal b/d 1056

 5%

YEAR
DEBTOR
BAD DEBTS
NET DEBTS
SPECIFIC PRO

GENERAL PRO
SPECIFIC PRO
TOTAL PRO

1992
31-Dec

1993
31-Dec

1994
31-Dec
31-Dec

1995
31-Dec
 1992 1993 1994 1995
$ 24,517 $ 28,378 $ 22,529 $ 32,675
$ (4,890) $ (3,712) $ (6,573) $ (5,960)
$ 19,627 $ 24,666 $ 15,956 $ 26,715
$ (2,000)
$ 19,627 $ 22,666 $ 15,956 $ 26,715
$ 981 $ 1,133 $ 798 $ 1,336
$ 2,000
$ 981 $ 3,133 $ 798 $ 1,336

PROVISIONS FOR BAD DEBTS

1992
Bal c/d 981 31-Dec P&L A/C 981

981 981

1993
Bal c/d 3133 1-Jan Bal b/d 981
31-Dec P&L A/C 2152
3133 3133

1994
Bal c/d 798 1-Jan Bal b/d 3133
P&L A/C 2335
3133 3133

1995
Bal c/d 1339 1-Jan Bal b/d 798
31-Dec p&l a/c 541
1339 1339

1996
1-Jan Bal b/d 1339
 10%

YEAR $ 1,994 $ 1,995 $ 1,996 $ 1,997

DEBTOR $ 10,000 $ 28,570 $ 23,360 $ 18,200
BAD DEBTS NIL $ 6,453 $ 3,852 $ 6,574
NET DEBTS $ 10,000 $ 22,117 $ 19,508 $ 11,626
SPECIFIC PRO NIL NIL NIL $ 1,500
$ 10,000 $ 22,117 $ 19,508 $ 10,126
GENERAL PRO $ 1,000 $ 2,212 $ 1,951 NIL
SPECIFIC PRO $ 1,500
TOTAL PRO $ 1,000 $ 2,212 $ 1,951 $ 1,500

PROVISIONS FOR BAD DEBTS

1994 1994
31-Dec Bal c/d 1000 31-Dec P&L A/C 1000

1000 1000

1995 1995
31-Dec Bal c/d 2212 1-Jan Bal b/d 1000
31-Dec P&L a/c 1212
2212 2212
1996 1996
31-Dec Bal c/d 1951 1-Jan Bal b/d 2212
31-Dec P&L a/c 261
2212 2212
1997 1997
31-Dec Bal c/d 1500 1-Jan Bal b/d 1951
31-Dec P&L a/c 451
1951 1951

1998
1-Jan Bal b/d 1500
 RENT EXPENSES / PAYABLES A/C
1/1/1988 Bal b/d 500 31-Dec p&l a/c 2600
9/30/1988 Cash 1400
12/31/1988 Cash 700
2600 2600

RENT RECEIVED A/C

12/31/1988 P&L a/c 1200 1/1/1988 Bal b/d 500
6/30/1988 cash 600
12/32/1988Bal c/d 100
1200 1200
1/1/1989 Bal b/d 100
1 Lee Co. purchased a new machinery for $240,000 on May 1, 1992. It is estimated that it will have a useful life of 10 years, scr
$15,000, production of 240,000 units, and working hours of 25,000. During 1993 Lee Co. uses the machinery for 2,650 hours, a
produces 26,000 units.

Required: From the information given, compute the depreciation charge for 1993 under each of the following methods:
(a) Straight-line
(b) Reducing-balance (use 20% as the annual rate)
(c) Units-of-output
(d) Working hours
(e) Sum-of-the-years’-digits

STRAIGHT LINE METHOD

Depreciation Charge = Cost – Scrap Value

Useful Life

$240,000 - $15,000
10

22500
Depreciation for the year 1993 using the SLM is $22500 per annum

Rate of Depreciation = (1 – {n √s/c}] x 100%

n = expected useful/service life in years

s = salvage/residual/scrap value
c = the acquisition cost

(4) Using the information given below prepare a table showing the depreciation charge that would be taken to the Profit an
the years 1993 to 1997 inclusive, for
(a) The Straight line method
(b) The reducing balance method
(c) The sum-of-the-years digits method

 Cost of fixed assets $5,000 on 1 January 1993

 Estimated useful life five (5) years
 Estimated salvage value $100
 Assume the accounting year ends on 31 December.
 STRAIGHT LINE METHOD

Depreciation Charge = Cost – Scrap Value

Useful Life

year 1993
$5000 - $100

$5
980

Year 1993 = 980

Year 1994 = 980
Year 1995 = 980
Year 1996 = 980
Year 1997 = 980
 REDUCING BALANCE METHOD

year 1 (cost ) * depreciation rate = depreciation value

year 2 (cost - Depreciation value from last year) * Depreciation rate =
depreciation value

Year one - 1992

(240000 ) * 20%
48000

Year two - 1993

(240000 - 48000) * 20%
38400

FINDING RATE PERCENTAGE

 REDUCING BALANCE METHOD

year 1 (cost ) * depreciation rate = depreciation value

year 2 (cost - Depreciation value from last year) * Depreciation rate =
depreciation value

SUM OF THE YEARS

Rate of Depreciation = (1 – {n √s/c}] x 100%

n = expected useful/service life in years

s = salvage/residual/scrap value THE SUM OF THE YEARS :
c = the acquisition cost 5+4+3+2+1 = 15
Depreciation Years
Rate of Depreciation = (1 - (5^100/5000))*100% 1
0.5427 2
54.27 3
54.3% 4
YEAR ONE 1993 5
5000 * 54.3% =
(COST - SALVAGE VALUE ) *
2715 Depreciation fraction
YEAR TWO 1994
(5000 - 2715) * 54.3% = 2285 * 54.3% = (5000-100) * 5/15 = 1633
1241 (5000-100) * 4/ 15 = 1306.67
YEAR THREE 1995 (5000-100) * 3/15 = 980
(2285-1241) * 54.3% = 1047 * 54.3% = (5000-100) * 2/15 = 653
567 (5000-100) * 1/15 = 326.67
YEAR FOUR 1996
(1047 - 567) * 54.3% = 480 * 54.3% =
261
YEAR FIVE 1997
(480-261) * 54.3% = 219 * 54.3% =
119
 Remaining years Depreciation Fraction
5 5/15/
4 4/15/
3 3/15/
2 2/15/
1 1/15/

Depreciation charges for 1993

Depreciation charges for 1994
Depreciation charges for 1995
Depreciation charges for 1996
Depreciation charges for 1997
P A Opening
A L
P L
A A closing
 EXPENSES A/C
1997 1997
1-Jan Bal b/d (rates) 260 1-Jan Bal b/d (Electricity) 230
cash 6830 31-Dec bal c/d (rent) 320
31-Dec Bal c/d (Elec) 270 31-Dec P&L a/c 6810
7360 7360

1/1/1998 Bal b/d 320 1/1/1998 Bal b/d 270

P A OPEN
A L
P L
A A ENDING
 EXPENSES A/C
1/1/2004 Bal b/d (Elec) 1685 1/1/2004 Bal b/d (Rates) 3800
17/06/2004 cash 13500 12/30/2004 Bal c/d (Rent) 1505
23/10/2004 cash 12750
12/31/2004 Bal c/d(Tel) 1800 12/31/2004 P&L a/c 24430
29735 29735
1/1/1999 Bal b/d (rent) 1505 1/1/1999 Bal b/d(Tel) 1800
CALCULATIONS

Year Debtors

1991 5040
1992 9032
1993 10073
1994 15000

31/12/199Bal c/d

31/12/199Bal c/d

31/12/199Bal c/d

31/12/199P&L A/C
31/12/199Bal c/d
 1%

Already Debtors likely

Written off to go bad PROVISION CHANGE

69 40 50 90
141 32 90 122
197 73 100 173
- - 150 150

PROVISION FOR BAD DEBTS A/C

90 31/12/1991 P&L A/C 90

90 90

122 1/1/1992 Bal b/d 90

31/12/1992 P&L A/C 32
122 122

173 1/1/1993 Bal b/d 122

31/12/1993 P&L A/C 51
173 173
23 1/1/1994 Bal bld 173
150
173 173
1/1/1995 Bal bld 150
Capital - The money / items used to start up the business e.g Vehicle, money, etc

Owners' Equity - This is the money made after the years of operations of the business as
well as the monies invested by the owner. The equity is usually seen as monies owed to
the owner.
ASSETS, LIABILITIES AND CAPITAL ARE IMPORTANT IN THE BALANCE SHEET AND
STATEMENT OF FINANCIAL POSITION
Double ENTRY SYSTEM - FOR EVERY CREDIT, YOU DEBIT THE OTHER ACCOUNT FOR EVERY
TRANSACTION.
Profit and loss a/c is used to determine the position of the business for a given period of
time. It is apart of the double entry system.
EXPENSES ARE OUTFLOWS OF MONEY
REVENUES ARE INFLOWS OR ENHANCEMENTS OF ASSETS, SETTLEMENT OF A LIABILITY OR
A COMBO OF BOTH
Liabilities can be long term (morgage) or short term (1 year cash loans) incurred by the
business.
EXPENDITURES ARE AMOUNTS THAT ARE PAID OR NEEDED TO BE PAID OVER TIME FOR
AN ITEM. THEY CAN BE CATEGORIZED AS CAPITAL OR REVENUE EXPENDITURE
CAPITAL EXPENDITURE - IS CAPITAL USED TO PURCHASE FIXED ASSETS FOR THE BUSINESS
(vehicle, furniture, fixtures)
REVENUE EXPENDITURE - INCURRED DURING THE DAY TO DAY OPERATIONS OF THE
BUSINESS. E.g (Services and maintenance of assets)

REAL ACCOUNTS - RECORD YOUR TSNGIBLE ASSETS SUCH AS LAND, FURNITURE,

INVESTMENTS, BUILDING, CASH, PLANT, VEHICLES AND SO ON. REAL ACCOUNTS ARE
ALWAYS DEBITED AND IN THE EVENT THAT DISPOSAL OR DEPRECIATION TAKES PLACE
THEN THAT WOULD BE ENTERED ON THE CREDIT SIDE. NB: PURCHASES AND SALES
ACCOUNTS ARE REAL ACCOUNTS

SPECIAL REAL ACCOUNT - STOCK / INVENTORY WOULD HAVE A DEBIT ENTRY AT THE END
OF ACCOUTING YEAR. And is removed by a credit entry at the beginning of the new
accounting year.

PERSONAL ACCOUNTS - THESE SHOWS TRANSACTIONS BETWEEN PERSONS OR

INSTITUTIONS. ONCE A SUPPLIER PURCHASES ON CREDIT THEN WE ENTER ON THE
CREDIT SIDE. HOWEVER SALES INVOICES ARE ENTERED ON DEBIT SIDE OF CUSTOMER
ACCOUNT. (CAPITAL, PREPAYMENTS, ACCRUED INTEREST) - THEY AFFECT THE
ENTRENEUR DIRECTLY
THE CASH BOOK IS A PERSONAL ACCOUNT. The BANK ACCOUNT AND CASH ACCOUNT CAN
BE FOUND IN THE CASH BOOK

NOMINAL A/C - accumulates data required for your T,P & L a/c. Deals with Purchases,
whatever we are trading, sales, profits or losses we incur due to our trading, EXPENSES.
REAL AND PERSONAL ACCOUNTS ACCUMULATE DATA FOR THE BALANCE SHEET
DRAWINGS - WITHDRAWL OF GOODS OR CASH FOR PERSONAL USE OR BUSINESS
TYPES OF ACCOUNTS - REAL, PERSONAL AND NOMINAL
DEPRECIATION - FAIR WEAR AND TEAR
PROVISION - PUTTING ASIDE AN AMOUNT TO CATER FOR LOSS OR LIABILITY WHICH
MIGHT BE INCURRED
ACCRUALS - EXPENSES THAT HAVE BEEN ENJOYED BUT HAVE NOT BEEN PAID AT
ACCOUNTING DATE.
PREPAYMENTS ARE THE OPPOSITE OF ACCRUALS -MEANING THAT THEY HAVE BEEN PAID
FOR BUT NOT YET ENJOYED, IT CAN BE FOUND ON A BALANCE SHEET
TRADE DEBTORS - THOSE WHO OWE MONEY TO THE BUSINESS DUE TO CREDIT
PURCHASES
TRADE CREDITORS - THOSE WHO THE BUSINESS OWES MONIES DUE TO GOODS THAT THE
BUSINESS WOULD'VE PURCHASED ON CREDIT.
DISCOUNTS ALLOWED -
DISCOUNTS RECEIVED -
ACCOUNTING EQUATION = ASSETS = LIABS + CAPITAL

LIABILITIES = TO INCREASE A LIAB ACCOUNT WE CREDIT IT, TO DECREASE, WE DEBIT IT.

CREDITORS ARE PERSONS THE BUSINESS OWE
DEBTORS ARE PERSONS WHO OWE THE BUSINESS

DEBIT THE PROFIT AND LOSS ACCOUNT AND CREDIT THE PROV FOR BAD DEBTS ALC
TREATMENT FOR THE FOLLOWING:
TYPES: ACCRUAL INCOME AND ACCRUAL EXPENSE

THREE METHODS TO FINDING PROVISION FOR BAD DEBTS: FIND THE

PERCENTAGE OF DEBTORS, AGING SCHEDULE, MAKING ASESSMENTS
BASED ON PASS OBSERVATIONS
TO BE WRITTEN OFF VS ALREADY WRITTEN OFF
The CASH BOOK records all transactions that are made in cash or by cheque NOT
CREDIT

THE CASH BOOK IS A BOOK OF PRIME/ORIGINAL ENTRY ALONG WITH THE SALE
JOURNAL, PURCHASES JOURNAL, RETURN INWARDS AND RETURN OUTWARDS
JOURNALS

IF THE BUSINESS IS KEEPING A CASH BOOK THEN THERE IS NO NEED TO CREATE A

CASH ACCOUNT WHEN DOING DOUBLE ENTRY IN LEDGERS

THE CASH BOOK SERVES THE DUAL ROLE OF CASH BOOK AS WELL AS LEDGER

THE CASH BOOK IS A LEDGER DUE TO ITS DESIGN WHICH IS THAT OF A CASH
ACCOUNT.

CASH RECEIPTS ARE RECORDED ON THE DEBIT SIDE

CASH PAYMENTS ARE RECORDED ON THE CREDIT SIDE

FEATURES OF THE CASH BOOK:

THE CASH BOOK IS A BOOK OF ORIGINAL ENTRY SINCE THE TRANSACTIONS ARE
RECORDED FROM THE FIRST TIME FROM THE SOURCE DOCUMENT

THE THREE COLUMN CASH BOOK HAS THE FOLLOWING COLUMNS:

NO CREDIT PURCHASES ARE ALLOWED IN THE CASH BOOK E.G: Credit purchase from T. Lee
$4,550 who promise to give a 10% discount if payment is made in two weeks.

TRANSACTIONS JUST AS THE FOLLOWING ARE ALWAYS RECORDED IN THE CASH COLUMN UNTIL
IT IS DEPOSITED IN THE BANK. ONLY THEN IT GOES TO THE BANK COLUMN: Received from John a
debtor $5,500 cheque in full settlement of his debt totalling $5,750.

CONTRA ENTRY DEALS WITH TRANSACTIONS DEALING WITH MONIES MOVING IN AND OUT OF
THE CASH AND BANK COLUMNS ONLY: E.G 1. Withdrew from the bank $5,000 2. 10. Withdrew
$5,500 from the bank to purchase office supplies which cost $4,320. 3. 7. Deposited the cheques
received to date and $10,000 into the bank

1. ONLY CASH TRANSACTIONS ARE RECORDED. 2. ALL CASH RECEIPTS ARE ON DEBIT
AND CASH PAYMENTS ARE ON CREDIT SIDE. 3. CASH BOOK WILL NEVER SHOW A
CREDIT BALANCE. 4. IT FUNCTIONS AS A JOURNAL AND A LEDGER

DISCOUNT a/c (Nominal account) . 2 CASH A/C (Real Account) 3. Bank (Personal a/c)
DR RAY CHARLES CASH BOOK AS AT 30TH MARCH, 1997
Discount
DATE SOURCE FOLIO Allowed Cash Bank DATE PAYEE FOLIO
1/3/1997 BAL B/D 45000 1/3/1997 BAL B/D
1/3/1997 John (Debtor) 250 5500 1/3/1997 Office Furniture GL
3/3/1997 Cash C 10000 1/3/1997 Office Supplies GL
7/3/1997 R. Dickson GL 1200 20000 2/3/1997 Electricity GL
9/3/1997 R. Murray GL 1750 35000 2/3/1997 Purchases GL
12/3/1997 Bank C 5000 2/3/1997 P. PARKER PL
15/03/2020sales GL 3200 3/3/1997 Bank C
4/3/1997 S. Small PL
6/3/1997 Cash C
12/3/1997 Wages GL
19/3/1997 L. Singh PL
21/03/97 T. Lee PL

30/03/97 bal cl/d

Dis Allowed 3200 78700 45000 Dis Rec'd
30/03/97 Bal bld 2950 35180 21040
 CR
Discount
Received Cash Bank
5860
4630
1540
1500
12800
3600
10000
150 2000
5000
8500
100 7500
4550

2950 35180 21040

3200 78700 45000
DR S. PERSAUD CASH BOOK AS AT 1st JUNE, 1997
Discount
DATE SOURCE FOLIO Allowed Cash Bank DATE PAYEE
1/5/1997 Bal bld 15000 45600 3/5/1997 Motor Car
2/3/1997 R. George PL 25 2500 4/5/1997 Purchases
5/5/1997 Sales GL 15050 7/5/1997 Bank
6/5/1997 Sales GL 8500 8/5/1997 Moore
7/5/1997 Cash C 21000 9/5/1997 P. GREENE
10/5/1997 Bank C 5500 10/5/1997 Cash
20/05/97 Radder PL 3000 10/5/1997 Office supplies
25/05/97 R. LEWIS

30/05/97 bal cl/d

Dis Allowed 25 49550 66600 Dis Rec'd
1/6/1997 Bal bld 18580 32100
 CR
Discount
FOLIO Received Cash Bank
GL 25000
GL 5000
C 21000
PL 200 3000
PL 1000
C 5500
GL 4320
PL 650

200 18580 32100

47050 66600
Trading account - gives you your gross profit (Net sales - Cost of goods sold = Gross profit)

The gross profit is bal b/d in your profit and loss a/c

STOCK - Opening stock and closing stock

opening stock in the trading a/c- this is the closing stock of unsold goods at the end of the previous
a/c period that is brought down to the current period as opening stock. It is entered on the debit
side of the trading a/c.

closing stock - this refers to the stock of unsold goods for the current accounting period. closing
stock can be valued at the cost price or the market price (WHICH EVER IS LESS IS USED IN THE
TRADING A/C).

The closing stock isn't given in the trial balance. If it is given in the trial balance then it is not to be
shown on the credit side of the trading a/c, but it appears only in your balance sheet as an asset.

ADD PURCHASES IN THE TRADING ALC - This includes both cash and credit purchases.

NB: Drawings (Drawings related to purchases e.g withdrew goods for personal use) and return
outwards are subtracted from your PURCHASES in the trading balance

CARRIAGE INWARDS - Transportation cost that the business would have incurred for goods coming
into the business - This is a debit entry in the Trading account

CARRIAGE OUTWARDS - Transportation cost that the business incurred for shipping goods to the
customers - This is an expense and belongs to the Profit and Loss a/c

Profit and loss a/c - considers all expenses and income. Net profit / Net loss is found in the P&L. All
indirect revenue expenses are on the debit side of the P&l while indirect revenue income is shown
on the credit side of the P&l a/c.

The P&L measures the income by matching revenues and expenses according to the accounting
principle

NET INCOME = TOTAL REVENUE - TOTAL EXPENSES

BALANCE SHEET

The characteristics of the balance sheet - 1. It is only a statement and not an account

2. It has a debit and credit side (ASSETS SIDE - DR) (LIABILITIES SIDE - CR)
3. It is prepared for a particular point in time and not for a particular period.
4. The balance sheet is a summary of balances from the ledger accounts which were not closed by
transfering to your P&l a/c

5. It shows the nature and value of assets and nature and amount of liabilities at a given date.
THE ACCOUNT PROCESS REVOLVES AROUND THE ACCOUNTING CYCLE

1. IDENTIFY POSSIBLE TRANSACTIONS AS IT MAY RELATE TO THE BUSINESS

NB: A TRANSACTION IS AN EVENT WHICH YOU CAN EXPRESS IN TERMS OF MONEY AND WHICH BRINGS CHANGES OF THE FIN
POSITION OF THE BUSINESS
NB: AN EVENT IS ANY INCIDENT WHICH MAY OR MAY NOT BRING ANY CHANGE IN THE FINANCIAL POSITION OF THE BUSINESS
NB: CHARACTERISTICS OF TRANSACTIONS: IT IS A COMPLETE ACTION 2. IT BRINGS CHANGES TO FINANCIAL POSITION OF B
ALL TRANSACTIONS CAN BE CONSIDERED EVENTS BUT ALL EVENTS ARE NOT TRANSACTIONS
TRANSACTIONS COULD BE EXTERNAL - THIRD PARTY PERSON OR ENTITY
TRANSACTIONS COULD BE INTERNAL - DEPRECIATION CHARGE ON MACHINERY

ALL TRANSACTIONS ARE RECORDED IN THE JOURNAL WHICH IS THE FIRST BOOK OF ORIGINAL ENTRY
INESS. 3. CAN BE EXPRESSED IN TERMS OF MONEY
 CLASSIFYING TYPRES OF ACCOUNTS - NOMINAL, REAL AND PERS
INVESTMENTS REAL ACCOUNT
FREEHOLD PREMISES REAL ACCOUNT

ACCRUED INTEREST PERSONAL ACCOUNT

AARON'S INDUSTRY PERSONAL ACCOUNT
JACKIE WORKS PERSONAL ACCOUNT
SALARY ACCOUNT NOMINAL ACCOUNT
LOOSE TOOLS REAL ACCOUNT
PURCHASES A/C REAL ACCOUNT
CAPITAL PERSONAL ACCOUNT
REPUBLIC BANK NOMINAL ACCOUNT

ROYALTY ACCOUNT NOMINAL ACCOUNT

SALES ACCOUNT REAL ACCOUNT
BRIDGETOLL NOMINAL ACCOUNT
DIVIDENDS RECEIVED NOMINAL ACCOUNT
BROKERAGE A/C NOMINAL ACCOUNT
CLASSIFYING TYPRES OF ACCOUNTS - NOMINAL, REAL AND PERSONAL

In this case, accrued interest is whatever interest would've accrued based on an

outstanding debt, that the OWNER hasn't collected as yet

Tangible assets

Always a personal account because CAPITAL is what YOU THE OWNER invest into the business…This investment affects you di
From a bank account, interest can be accumulated, thus the company can profit
Royalty is payable by a user to the owner of the property or something on
which an owner has some special rights.

The business can either gain or loose

s investment affects you directly