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# Double Entry System PowerPoint PPT Presentation

Double Entry System. DR. CR. Accounting Equation. The funds of a business provided by its owners and the profits entitled to him. Debts owed by a business to external parties such as suppliers. Items of value owned by the business. A ssets = O wner’s E quity + L iabilities. Building

Double Entry System

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Double Entry

System

DR

CR

## Accounting Equation

The funds of a business provided by its owners and the profits entitled to him

Debts owed by a business to external parties such as suppliers

Items of value owned by the business

Assets = Owner’sEquity + Liabilities

Building

Motor vehicle

Office Equipment

Fixtures

Stock (closing)

Cash in hand

Cash at bank

Capital

Profits

Creditors

Loan from bank

Other creditors

Assets = Owner’sEquity + Liabilities

* Explain these terms to students

Assets = Owner’sEquity + Liabilities

Every transaction will affect 2 items.

The equation will still balance!

A = OE +L

TRANSACTION THAT AFFECTS BOTH ASSET AND LIABILITY

ASSET LIABILITY 

ASSETLIABILITY

TRANSACTION THAT AFFECTS BOTH ASSET AND OWNER’S EQUITY

ASSET OWNER’S EQUITY 

ASSETOWNER’S EQUITY

A= OE +L

TRANSACTION THAT AFFECTS

ASSETS ONLY

ASSET ASSET 

TRANSACTION THAT AFFECTS

LIABILITIES ONLY

LIABILITYLIABILITY

Examples :

A= OE +L

a) John began business with cash in hand \$5000.

Cash\$5000Capital \$5000

• The firm took a bank loan of \$8000.

Cash\$8000Bank Loan \$8000

• Being purchase of motor vehicle from

Motor Vehicle\$2000Cash\$2000

Examples :

A= OE +L

d) Being payment of \$500 to Creditor, Peter.

Cash\$500Creditors \$500

e) Being receipt of \$3500 in cheque from a debtor.

Debtors\$3500Cash at Bank \$3500

Examples :

A= OE +L

f) Being repayment of bank loan for \$1500.

Cash\$1500Bank Loan \$1500

g) Being purchase of office equipment from

Lee Trading on credit for \$780.

ACCOUNTING EQUATION

Assets= Owner’s Equity +Liabilities

What is a Balance Sheet?

It is a report that is used to present the Accounting Equation that involves a firm’s total assets, total owner’s equity and total liabilities of an accounting period.

It is a report that external parties like investors or bankers look at when making important business decisions.

How does it look like?

Click me!

Assets =Owner’s Equity +

Liabilities

BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets\$ \$

Building

Office Equipment

Motor Vehicle

Fixtures

Current Assets

Stock (*closing)

Debtors

Bank

Cash

Owner’s Equity \$

Capital

Less: Drawings

Long Term Liabilities

Loan from bank

Current Liabilities

Creditors

Other creditors

Same figure

A = OE + L

Example 2 :

BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets\$ \$

Motor Vehicle 25000

Fixtures 10050

35050

Current Assets

Stock 4570

Debtors 7400

Cash 630

12600

Owner’s Equity \$

Capital 38000

Long Term Liabilities

Loan from bank 3000

Current Liabilities

Creditors 6650

47650

47650

+ 2000

+ 2000

a) Owner brought in cash \$2000 as additional capital

Example 2 :

BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets\$ \$

Motor Vehicle 25000

Fixtures 10050

35050

Current Assets

Stock 4570

Debtors 7400

Cash 630

12600

Owner’s Equity \$

Capital 38000

Long Term Liabilities

Loan from bank 3000

Current Liabilities

Creditors 6650

+ 2000

+ 2000

47650

47650

- 1000

- 1000

b) Owner paid off the loan \$1000

Example 2 :

BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets\$ \$

Motor Vehicle 25000

Fixtures 10050

35050

Current Assets

Stock 4570

Debtors 7400

Cash 630

12600

Owner’s Equity \$

Capital 38000

Long Term Liabilities

Loan from bank 3000

Current Liabilities

Creditors 6650

+ 2000

- 1000

- 1000

+ 2000

47650

47650

- 1100

- 1100

c) Ownerpaid creditors \$1100

BALANCE SHEET

AS AT 31 Dec 2000

Fixed Assets\$ \$

Motor Vehicle 25000

Fixtures 10050

35050

Current Assets

Stock 4570

Debtors 7400

Cash 530

12500

Owner’s Equity \$ \$

Capital 40000

Long Term Liabilities

Loan from bank 2000

Current Liabilities

Creditors 5550

47550

47550

IN CLOSING…