Principle of Double Entry

SLIDESMANIA.COM

Chapter 4 : ACC117
 Able to:
Learning ● Apply double entry rules to

prepare journals and

Outcome ledger accounts.

● Prepare pre-adjusted trial

balance.
● Prepare pre-adjusted

financial statement.
SLIDESMANIA.COM
 Types of Account
Personal Account
The personal accounts are headed
with the name of a person or business.
These persons are either account
receivables or account payables of the
business. Capital and drawings
accounts are also personal accounts as
they represent the accounts for the
owner of the business.
SLIDESMANIA.COM
Impersonal Account
Impersonal accounts record transactions that
are not headed with the name of any person.
They can be subdivided into:
a)Real accounts: record things that are owned
by the business. They are the assets of the
business such as machinery, building and
stocks.
b)Norminal accounts: record all expenses
such as salaries, advertising etc. and all
revenues and incomes such as interest
received, commission received, etc.
 01
Double Entry Rules.
Each transaction has a two sided or dual effect on each of the parties involved in it. As a
result of this, both sides and effects of every transaction must be recorded in the accounting
system for information to be completed. Any change in one item of an entity is followed by
SLIDESMANIA.COM

another monetary change which is equal but of opposite effect in another item.
 Double Entry Rules
Assets + Expenses = Liabilities + Revenues + Equity *
Increase DR Increase CR
Decrease CR Decrease DR
Opening Balance (DR) Opening Balance (CR)

*In Equity

Capital – Increase (Cr), Decrease (Dr)

SLIDESMANIA.COM

Drawing – Increase (Dr)

 Did you know?
Rules of Double Entry

● Every transaction affects at least two

accounts
● There must be at least one debit and
one credit entry
● The total debits must be equal to the
total credits
● The particulars in the account where
the other entry in the double entry is
SLIDESMANIA.COM

recorded.
 02
Ledger Entries.
❑ An account is a chronological record of the increases and decreases related to an item,
whether the item is an asset, a liability, an owner’s equity, an expense or a revenue
❑ An account is found in the ledgers.
SLIDESMANIA.COM

❑ An account is called a T account since it is shaped like a T.

 Ledger entries
Account Name ● Date column – to record
Date Particulars RM Date Particulars RM
date of transaction

● Particulars column – to
Debit column (DR) Credit column (CR) record the related account

● Folio column – for cross

referencing

● Amount column – to record

amount of money
SLIDESMANIA.COM
 Types of Ledgers

● Three types:

1. General ledger

2. Purchase ledger

3. Sales ledger
SLIDESMANIA.COM
 Types of Ledger

General ledger Purchase ledger Sales ledger

• A ledger for all • A ledger for • A ledger for

other accounts suppliers’(creditors’) debtors’ personal
(other than debtors personal accounts accounts
and creditors
personal accounts) • To record the • To record the
movement in movement in
supplier(creditor) buyers/debtors
personal accounts personal accounts
SLIDESMANIA.COM

individually individually
 Balancing off Ledger Accounts.
The steps for balancing off the accounts are:
1. Add up both sides of an account.
2. Find the difference between the larger and the smaller of the totals.
3. Balancing figure – the difference between the larger amount and the smaller
amount – balance carried down
❑ Debit balance – total amount of debit entries is greater than total amount of credit
entries
❑ Credit balance – total amount of credit entries is greater than total amount of debit
entries
SLIDESMANIA.COM
 03
Trial Balance.
A trial balance is a list of all accounts with balances at a particular date.(all ledgers accounts
with zero balances are excluded)
Purposes of trial balance:
● It acts as a test of the equality of the debit and credit balances in the ledger. ie. It checks the
arithmetical accuracy of the double entry rules used.
SLIDESMANIA.COM

● It helps to localize errors within a given time period.

● It helps to facilitate the preparation of the financial statements.
 ABC ENTERPRICE
TRIAL BALANCE AS AT ………
PARTICULARS (LIST OF DEBIT (RM) CREDIT (RM)
ACCOUNTS

TOTAL (RM)

Accounts with debit Accounts with credit

balances (balance b/d) are balances (balance b/d) are
placed on the debit column placed on the credit column
SLIDESMANIA.COM

TRIAL BALANCE
 04
Financial Statements

Pre adjusted Financial Statements Consist of:

Statement of Profit or Loss
Statement of Financial Position
SLIDESMANIA.COM
 Statement of Profit or Loss
Measures the financial performance or
profitability over a specific period of time
SLIDESMANIA.COM
 Statement Of Financial
Position

Summarizes the business’ assets, liabilities

and equity at a specific point of time
SLIDESMANIA.COM