Double Entry
This presentation is the property of its rightful owner.
Sponsored Links
1 / 18

Double Entry System PowerPoint PPT Presentation


  • 105 Views
  • Uploaded on
  • Presentation posted in: General

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

Download Presentation

Double Entry System

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Double entry system

Double Entry

System

DR

CR


Accounting equation

Accounting Equation


Double entry system

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


Double entry system

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


Double entry system

Assets = Owner’sEquity + Liabilities

Every transaction will affect 2 items.

The equation will still balance!


Double entry system

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


Double entry system

A= OE +L

TRANSACTION THAT AFFECTS

ASSETS ONLY

ASSET ASSET 

TRANSACTION THAT AFFECTS

LIABILITIES ONLY

LIABILITYLIABILITY


Double entry system

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

  • ABC Trading for $2000.

Motor Vehicle$2000Cash$2000


Double entry system

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


Double entry system

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.

Office Equipment$780Creditors$780(Lee Trading)


Double entry system

ACCOUNTING EQUATION

Assets= Owner’s Equity +Liabilities


Double entry system

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!


Double entry system

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

Add: Profits

Less: Drawings

Long Term Liabilities

Loan from bank

Current Liabilities

Creditors

Other creditors

Same figure


Double entry system

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


Double entry system

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


Double entry system

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


Double entry system

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


Double entry system

IN CLOSING…


  • Login