double-entry

THE

System- OF - Book KEEPING

DOUBLE - ENTRY SUSTEM

Assets Liabilities Owner's Equity
Debit Credit Credit Debit Credit

account representing a ledger accout

* There will always oe one account that is debited and anothev

POSTING
EXPENSES AND INCOME
pebit all expenses electricity I water bills , advertising, rental
Credit al income commission vental

INVENTOR
increase in inventow (4o be debited
LD purchases
Sales return
decrease in inventory to be credited)
½ Sales

Why do we need to open seperate accounts fov inventor 2.

bought hitt be valued at lost price
Inventory sold will be valued at selling price

PERSONAL ACCOUNT
the account of a persun or lousiness
I debit balance: amount oued to the lousiness from a customer.
L credit balance: amdunt the tousiness owed to the supplier
@ Ii .
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INTERPRETING LeDGER ACcoUN TS
be bit bulance n Caslo . hoW mMch cas te boUsSi esS have
Debił bala e in bank amou t thoe busi e sS has in s ban
Credił boal unce in ban = a ouht the buSi ne sS owe tu the bank
Credit b6ulalce in sq|es - Sales made fu 0 period
Devił baLance in pur chases putc hases m ade for a pe riad -—
ADV ANTAGES of DoUBLE - ENTRy S STEM
Fu|| Deta)ts 0bo t tne as seS, liabi|itres ,expenseS, reven e
T e preparałlon of te financid| Statemen+ is eqsieh
The alculgtionof profit or losS for the year likely t be
More telian le-
Mo te infu eefdecis1on - m akikg Is poS ible
Agreater degree of contru| can be exercise
t e passi bilit of fraud is Yedluced .
TV

DIVIS ION oF LEDGtR

4L E k c H N D NA
Personal accouts of Personal acEOunts 0f A|| other aEcouVs:for
a |I (redit cuS†oMer a|| credit supplier asSet, liaboilities ond
trade teceival|es | thrade paya es
OWnet 's eg ity a|ong
With all incoiMe avd
expenS e dc cO unH
Adva |+09es 0f Div|Si on 0f 1e dgen s
ork can be sha keol amon9 seveva| People
Eas er fur reference as the sqme tYpes of accOu are teł
to9etMet
0 easier to Tntrod Mce checktng procedluve
Reduces te possibili of fra d

Let yow SMILE

change the WORLD
But dloet let tlne WORLD
clarngee yof SMI @ Ii .
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 BALANCING LEDGER ACCOUNTS
Example ques tion:
Apr Adam paid $2l0 wages in cash
He received commission of $900 boy cheane
b He purchased some goods for resale value $420 , by cheque
Apr The business purchased goods on credit value $1100
Apr Ad am Sold g00ds for $930 and Yecei ved payment by cheane
Apr The business Jotd sume goods on credit fo $ 380

Wages cash
BALANCe
Apr 2 cdsh Apr 30 Ba ey8 10 Apt 36 Apr 2 wages 210
Balance
M ay Balance 216 May bold

Bank commission

Apr 4 Commission 500 Apt b purchases (420 Apr 30 Bagnce 50o Apr 4 BanE 500
Balance Balanc
920 10 00 May bid Tot

11420 1420
May 1000

Purchases Trade payd bir

Apr 5 Bank ApI 30 balahe 1100 Apr 6 Purc hases 1100
trade Balance
Apr 6 payable 1100 May 1 100

Balanc 2120
May

Trade Receivable Sales

balance
Apr 9 sales 380 Aer 30 old 380 Apr 30 1300 Apr T Bank
Balance trade
May 380 Apt 9 receivable 380
1300
May Balance
bold 130 0

If account With one transation: If account with 7 transaction:

bank
cash 210 APr 36 old 410. Apr 4 commission 1 00 Apt 5 pur Chases 420
Balance 30 Balance
bid Aor 1 so les 920 Apr 1000
to py the atmount total it up D
carry the Amount May Balane 1000 use the amount on
to the negt to show that tre
Account is closed carry down to the
next month
the debit side to
minus the credit
Side
IÉ