TOPIC 2: THE

RECORDING
PROCESS
PREPARED BY:
MOHD SHARIL BIN MAT
NAYAN
2.1 Double entry system for assets,
liabilities, incomes, revenues and
capitals.
Double Entry
 A fundamental concept underlying present-day
bookkeeping and accounting
 States that every financial transaction has equal and
opposite effects in at least two different accounts.
 It is used to satisfy the accounting equation

ASSETS = LIABILITIES + CAPITAL

A= L+ C
 Help rationalize commercial transactions and make trade
more efficient.
 Helped understand their costs and profits
 Example:

LEDGER
Account Name Debit Credit
Cash RM20,000
Debtors RM20,000
BALANCE SHEET
ASSETS JUNE 2021 JULY 2021
Cash RM40,000 RM20,000
Debtors RM50,000 RM30,000
 LEDGER
Account Name Debit Credit
Inventories RM30,000
Sales RM30,000
INCOME STATEMENT
SALES JUNE 2021 JULY 2021
Cash RM80,000 RM120,000
 The accounting equation and the double-entry rules for
income and expenses
 The accounting equation, extended to include income and
expenses, can be expressed as follows:
A – L= C+ (I – E)
 This equation can be rearranged as A+ E = C+ L+ I
A = Assets
E = Expenses
C = Capital
L = Liabilities
I = Income
 Example:
A business has assets of RM110,000, liabilities of RM30,000,
income in the year of RM20,000 against expenses incurred of
RM10,000 and capital at the beginning of the year of
RM70,000. Using the two forms of the accounting equation,
insert these figures into each equation to show that the
equation holds true in both cases.

A = 110,000 A – L = 110,000 – 30,000 = 80,000

L = 30,000 C + (I – E) = 70,000 + (20,000 - 10,000) = 80,000

I = 20,000
A + E = 110,000 + 10,000 = 120,000
E = 10,000 C + L + I = 70,000 + 30,000 + 20,000 = 120,000
C = 70,000
Answer:
Each form of the equation is correct as both sides of the equal
sign in each case would have the same figure.
 In the first form of, A – L= C+ (I – E):
 RM80,000 (RM110,000 – RM30,000) = RM80,000
(RM70,000 + (RM20,000 – RM10,000))

 In the second form, A+ E =C+ L + I:

 RM120,000 (RM110,000 + RM10,000) = RM120,000
(RM70,000 + RM30,000 + RM20,000)
Tutorial
At the beginning of year 2021, AAA Sdn. Bhd. has assets of
RM110,000, liabilities of RM30,000 and capital of RM70,000
while income for the end of year 2020 is RM20,000 against
expenses incurred of RM10,000.
1) If the owner pump in RM50,000 more capital into the
company to increase the income to RM50,000, how much
the value of assets if expenses increase to RM20,000 at the
end of 2021?
2) If the company decide to reduce their debt to RM10,000
using RM15,000 from their cash, how much expenses has
been reduced (other factors remain unchanged)?
When doing journal entries, we must always consider four
factors:
I. Which accounts are affected by the transaction
 Akaun apa yang terlibat daripada transaksi tersebut
II. For each account, determine if it is increased or decreased
 Kenal pasti akaun mana yang naik atau turun
III. For each account, determine by how much it changed
 Kenal pasti jumlah perubahan
IV. Make sure that the accounting equation stays in balance
 Pastikan persamaan perakaunan sentiasa seimbang
Example 1:
ABC Company borrowed RM300,000 from the bank
 The accounts affected are cash (asset) and bank loan (liability)
 Cash is increasing because we are receiving cash from the bank
and
 bank loan (liability) is increasing because the company is
increasing its liability to pay back the bank at a later date. Cash
(asset) increasing.
 The amount in question is RM300,000
 A = L + C, A is increased by 300,000 and L is also increased by
300,000, keeping the accounting equation intact. Therefore, the
journal entry would look like:
• DR Cash: 300,000
• CR Bank Loan : 300,000
Example 2:
Purchased equipment for RM650,000 in cash
 The accounts affected are cash (asset) and equipment (asset)
 Equipment increase for 650,000 and cash decreased by 650,000
• DR Equipment: 650,000
• CR Cash: 650,000
Example 3:
Purchased inventory costing $90,000 for $10,000 in cash and the
remaining $80,000 on account.
Inventory (asset ) Increased, cash (asset) decreased, Account payable
(liability) increased
• DR Inventory: 90,000
• CR Cash: 10,000
• CR Accounts Payable: 80,000

A = L+C
DR CR DR CR
Recording Transaction Using T-accounts
Example 4:
1. The owner starts the business with RM5,000 paid into a
business bank account on 1 July 2020.
2. The business buys furniture for RM400 on credit from
Pearl Ltd on 2 July 2020.
3. The business buys a computer for RM600 on 3 July 2020
from the bank account.
4. The business borrows RM5,000 on loan from a bank on 4
July 2020. The money is paid into the business bank
account.
5. The business pays Pearl Ltd RM200 on 5 July 2020.
6. The owner takes RM50 from the bank for personal
spending on 6 July 2020.
TRANSACTION 1
The owner starts the business with RM5,000 paid into a business bank account on
1 July 2020.
1. Akaun yang terlibat
I. Capital (modal)
II. Bank (Asset)
2. bank (asset) increased, capital increased

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5,000

CAPITAL
DEBIT CREDIT
2020 RM 2020 RM
1 JULY BANK 5,000
 TRANSACTION 2
The business buys furniture for RM400 on credit from Pearl Ltd on 2 July 2020.
1. Akaun yang terlibat
I. Furniture (asset)
II. Pearl LTD (liability)

2. Perubahan
furniture (asset) increased, Pearl LTD (liability) increased

FURNITURE (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
2 JULY PEARL LTD 400
PEARL LTD (LIABILITY)
DEBIT CREDIT
2020 RM 2020 RM
2 JULY FURNITURE 400
TRANSACTION 3
The business buys a computer for RM600 on 3 July 2020 from the bank account.

COMPUTER (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
3 JULY BANK 600

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5,000 3 JULY COMPUTER 600
 TRANSACTION 4
The business borrows RM5,000 from a cimb bank on 4 July 2020. The money is
paid into the business bank account.

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5,000 3 JULY COMPUTER 600
4 JULY CIMB BANK 5,000

CIMB BANK (LIABILITY)

DEBIT CREDIT
2020 RM 2020 RM
4 JULY BANK 5,000
 TRANSACTION 5
The business pays Pearl Ltd RM200 on 5 July 2020.

PEARL LTD (LIABILITY)

DEBIT CREDIT
2020 RM 2020 RM
5 JULY BANK 200 2 JULY FURNITURE 400

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5,000 3 JULY COMPUTER 600
4 JULY BANK LOAN 5,000 5 JULY PEARL LTD 200
 TRANSACTION 6
The owner takes RM50 from the bank for personal spending on 6 July 2020.

CAPITAL
DEBIT CREDIT
2020 RM 2020 RM
6 JULY BANK 50 1 JULY BANK 5,000

BANK (ASSET ACCOUNT)

DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5,000 3 JULY COMPUTER 600
4 JULY BANK LOAN 5,000 5 JULY PEARL LTD 200
6 JULY CAPITAL 50
Example 5:
1. The owner starts the business with RM5,000 paid into a
business bank account and RM5,000 from bank loan from
Maybank on 1 July 2020.
2. The business buys furniture for RM400 from Pearl Ltd
and pay RM200 on 2 July 2020.
3. The business buys a computer for RM600 on 3 July 2020
and paid RM300 from the bank account.
4. The owner takes RM200 from the bank for his utilities
bills on 6 July 2020.
 TRANSACTION 1
The owner starts the business with RM5,000 paid into a business bank account and
RM5,000 from bank loan from Maybank on 1 July 2020.

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5000
1 JULY MAYBANK (LIABILITY)
5000
CAPITAL
DEBIT CREDIT
2020 RM 2020 RM
1 JULY BANK (ASSET) 5,000

MAYBANK (LIABILITY)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY BANK (ASSET) 5,000
 TRANSACTION 2
The business buys furniture for RM400 from Pearl Ltd and pay RM200 on 2 July
2020.
FURNITURE (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
2 JULY PEARL LTD (LIABILITY)
200
2 JULY BANK (ASSET) 200
BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5000 2 JULY FURNITURE (ASSET) 200
1 JULY MAYBANK (LIABILITY)
5000
PEARL LTD (LIABILITY)
DEBIT CREDIT
2020 RM 2020 RM
2 JULY FURNITURE (ASSET) 200
 TRANSACTION 3
The business buys a computer for RM600 on 3 July 2020 and paid RM300 from
the bank account.
COMPUTER (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
3 JULY BANK (ASSET) 300
3 JULY COMPUTER (LIABILITY)
300
BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5000 2 JULY PEARL LTD (LIABILITY)
1 JULY MAYBANK (LIABILITY) 200
5000 3 JULY COMPUTER (ASSET) 300
COMPANY (LIABILITIY)
DEBIT CREDIT
2020 RM 2020 RM
3 JULY COMPUTER (ASSET) 300
 TRANSACTION 4
The owner takes RM200 from the bank for his utilities bills on 6 July 2020.

CAPITAL
DEBIT CREDIT
2020 RM 2020 RM
6 JULY BANK (ASSET) 200 1 JULY BANK (ASSET) 5,000

BANK (ASSET)
DEBIT CREDIT
2020 RM 2020 RM
1 JULY CAPITAL 5000 2 JULY PEARL LTD (LIABILITY)
1 JULY MAYBANK (LIABILITY) 200
5000 3 JULY COMPUTER (ASSET) 300
6 JULY CAPITAL 200