Topic 03 - Double Entry System
Topic 03 - Double Entry System
Topic 03 - Double Entry System
T Accounts
SHAPED
LIKE a T Debit
Credit
T Accounts
Debit means
Left
Credit means
Right
Debi
t
Credit
T Accounts
Abbreviation
for Debit
Dr.
Cr.
Abbreviation
for Credit
T Accounts
ACCOUNT NAME
CASH
Dr. Cr.
ASSET ACCOUNTS
Increase on
Debit Side
Dr.
Cr.
Decrease on
Credit Side
LIABILITY ACCOUNTS
Decrease on
Dr.
Debit Side
Cr.
Increase on
Credit Side
CAPITAL ACCOUNT
Decrease on
Debit Side
Dr.
Cr.
Increase on
Credit Side
JUST LIKE
LIABILITY ACCOUNTS
EXAMPLE:
STEP #1
Name the accounts affected:
FURNITU
RE
CASH
STEP #2
Determine Classification of
Accounts
AS
AS S
SE
T
ET
CASH
FURNITURE
Did furniture
increase or decrease
in this transaction?
INCREASED
FURNITURE
DR.
RM80
0
CR.
DECREASED
CASH
DR.
+
CR.
RM80
0
DEBITS = CREDITS
FURNITURE
DR.
CR.
Cash
$800
CASH
DR.
CR.
Furniture
$800
EXAMPLE:
Ahmad, the owner, invested
$25,000 cash in the
business.
INCREASED OR
DECREASED?
INCREASED
INCREASED
CAPITAL
DR.
CR.
Cash
$25,000
CASH
DR.
+
Capital
$25,000
CR.
CREDIT
Asset
Fixed Asset
Current Asset
Liability
Long term Liability
Current Liability
Capital
For asset accounts, we will debit the asset account if the value is
increase; and we will credit the asset account if the value is
decreased.
Example
Ahmad bought a furniture for RM500 in cash.
Account name
To record
Furniture Account
+ (an increase)
debit RM500
Cash Account
- (a decrease)
credit RM500
DOUBLE-ENTRY ACCOUNTING
FOR RECORDING LIABILITIES
AND OWNERS EQUITY (CAPITAL)
For liability and owners equity accounts, we will credit the account
if the value is increase; and we will debit the account if the value is
decreased.
Example 1
Ahmad borrowed BankXX for RM2,000 to pay its debt to Syarikat
Kamdar (creditor).
Account name
BankXX Loan Account
Syarikat Kamdar
To record
+ an increase
Credit RM2,000
- a decrease
Debit RM2,000
Example 2
Ahmad started the business with initial cash capital of RM10,000.
Account name
To record
Capital Account
Credit RM1,000
Cash Account
Debit RM1,000
Account name
Machinery
Bank account
To
record
Entry in the
account
Transaction
Account name
To
record
Entry in the
account
Machinery account
Bank account
+
-
Debit
Credit
Van account
Cash account
Credit
Debit
Furniture account
Syarikat gagah
(creditor)
+
-
Debit
Credit
Capital account
Cash account
+
+
Credit
Debit
Syarikat Anis(creditor)
Bank account
Debit
Credit
What is revenue?
An income to the business.
Example: interest received, rent received.
CREDIT
+
To record
Credit RM1,000
Cash account
Debit RM1,000
To record
Salary account
Debit RM500
Cash account
Kredit RM500
Example 2:
Petrol expenses are paid by cheque RM300.
Account name
To record
Debit RM300
Bank account
Kredit RM300
Accounts involved
Cash purchase
Purchase account
Cash account
Debit
Credit
Credit purchase
Purchase account
Creditor account
Debit
Credit
Cash sales
Cash account
Sales account
Debit
Credit
Credit sales
Debtor account
Sales account
Debit
Credit
DOUBLE-ENTRY FOR
RETURN INWARDS AND RETURN OUTWARDS
Return inwards happen when goods which had been sold to
someone (debtor) are now returned by him/her back to the
firm (us).
This could be for various reasons such as:
a.
b.
c.
Return inwards
Accounts involved
a.
b.
c.
Transaction
Return outwards
Accounts involved
Transaction
Cash drawings
Goods drawings
Accounts involved
Example 1
2012
Jan 1
Jan 3
Jan 15
The business bought a furniture for RM500 on credit from Pak Abu.
Jan 28
Jan 31
Required:
Record the above transaction in the ledger and prepare the
Trial Balance as at 31 Jan 2012.
Example2
February
1
15
20
24
26
27
28
Required:
Record the above transaction in the ledger and prepare the
Trial Balance as at 28 February 2011.