2.

3
Accounting
Equation
ASSETS = LIABILITIES + OWNER’S EQUITY

PROFIT /LOSS

(CAPITAL + REVENUE - EXPENSES –

DRAWING)
 ACCOUNTING EQUATION TABLE
ASSETS = LIABILITIES OWNER’S EQUITY
+ -
+ + REVEN EXPENS
UE ES
-
+
- - DRAWIN
CAPITAL
G
Classification of
accounts
ASSETS LIABILITIES
OWNER’S EQUITY

REVENUE EXPENSES
CAPITAL DRAWING
 ASSETS
Equipment Accumulated Depreciation -
Contra
Supplies Inventory Allowance For Doubtful Accounts-
Contra
Vehicle land
Furniture Premises
bank Trademark
Accounts receivable Prepaid XXXXXX Expenses
cash Interest Receivable
Copyrights
 LIABILITIES
Accounts payable Accrued rent expenses
loan Interest payable
Overdraft bank mortgage
Bond payable
Note payable
Unearned revenue
Dividend payable
 REVENUE
Service revenue Commission received
Sales
Interest receipt/revenue
Discount Received
Bad Debt Recovered
Dividends (receipt)
Rent revenue
 EXPENSES
Bad Debts exp Freight In
Salary & Wages Freight Out
Rental
Supplies exp
Depreciation
Maintenance
Mr. Johan started business with cash
RM25,000

+ +
CASH CAPITAL
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 +CAPITAL 25000
Purchased goods for cash RM5,000

- -
CASH PURCHASES
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 +CAPITAL 25000
- CASH 5000 - PURCHASES 5000
Sold goods for cash RM7,500

+ +
CASH SALES
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 +CAPITAL 25000
- CASH 5000 - PURCHASES 5000

+ CASH 7500 + SALES 7500

Sold goods to Sam on account RM3,000

+ +
ACCOUNTS SALES
RECEIVABLE
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 = +CAPITAL 25000
- CASH 5000 = - PURCHASES 5000

+ CASH 7500 =
+ SALES 7500
+ACCOUNTS = + SALES 3000
receivable 3000
 Purchased furniture for RM1,000

+ -
FURNITURE CASH
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 = +CAPITAL 25000
- CASH 5000 = - PURCHASES 5000

+ CASH 7500 = + SALES 7500

+ACCOUNTS receivable = + SALES 3000

3000

+ FURNITURE 1000 =
- CASH 1000
 Paid wages RM200

- -
CASH WAGES
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 = +CAPITAL 25000
- CASH 5000 = - PURCHASES 5000

+ CASH 7500 = + SALES 7500

+ACCOUNTS PAYABLE = + SALES 3000

3000

+ FURNITURE 1000 =
- CASH 1000
- CASH 200 -WAGES 200
Mr. Johan withdrew RM100 from business to pay his
personal expenses.

- -
CASH DRAWING
S
ASSETS = LIABILITIES OWNER’S EQUITY
+CASH 25000 = +CAPITAL 25000
- CASH 5000 = - PURCHASES 5000

+ CASH 7500 = + SALES 7500

+ACCOUNTS PAYABLE 3000 = + SALES 3000

+ FURNITURE 1000 =
- CASH 1000
- CASH 200 -WAGES 200

-CASH 100 -DRAWING 100

2.4 Double- Entry System

Every business transaction will involve two

accounts (or more).

For example, when a company borrows money

from its bank, the company's Cash account
will increase and its liability account Loans
Payable will increase.

23
 Double- Entry systems
DEBIT = The left side of the account
CREDIT = The right side of the account

The following T-accounts :

Title of account
DEBIT CREDIT

27
Rules of Debit and Credit
Account Record DR/CR Baki
Normal

ASSET ↑ DEBIT
DEBIT
EXPENSES
DRAWINGS ↓ CREDIT

LIABILITY ↑ CREDIT CREDIT

EQUITY
REVENUE ↓ DEBIT 28