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double entry system 2 n.
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  1. Double Entry System 2 DR CR

  2. An Overview… General Journal Special Journals Ledger Accounts Trial Balance Adjustments Prepare Simple Financial Statements

  3. Objectives • At the end of the lesson, students should be able to : • know what are Ledger Accounts. • prepare Ledger Accounts using the ‘T’ format. • post transactions from the Journals to • the Ledger Accounts.

  4. Account Account LEDGER BOOK

  5. What is an Account ? An account is a brief and systematic record of transactions which are similar in nature.

  6. ‘T’ format • NAME OF ACCOUNT Dr Cr DEBIT CREDIT Left side Right side

  7. ‘T’ format • ASSETS ACCOUNT Dr Cr DEBIT CREDIT

  8. ‘T’ format Dr Cr • OWNER’S EQUITY ACCOUNT DEBIT CREDIT

  9. ‘T’ format • LIABILITY ACCOUNT Dr Cr DEBIT CREDIT

  10. DOUBLE - ENTRY ACCOUNTING SYSTEM Every business transaction will involve twoparties Each party must give up something (out)in order to receive something in return. (in)

  11. Cash IN Goods OUT Example: When the business sells its goods for cash, itwillgive upits goods to its customer andwillreceive cashin return. Firm Firm’s goods

  12. Goods IN Cash OUT Example: When a business purchase goods with cash, itwillgive upits cash to its suppliers andwillreceive goodsin return. Firm Supplier’s goods

  13. Motor Vehicle IN Cash OUT Example: When a business purchase a motor vehicle, itwillgive upits cash to the seller andwillreceive motor vehiclein return. Firm Motor Vehicle

  14. Debtors decreases Cash increases Example: When a debtor pays to the firm, the firm’s cash will increase and the firm’s debtors will decrease. Firm Debtor

  15. Creditors decreases Cash decreases Example: When the firm pays to the creditors, the firm’s cash will decrease and the firm’s creditors will decrease. Firm Creditors

  16. Hence, For every business transaction, two accounts will be involved. One account will have a debit entryand another account will have a credit entry.

  17. Paid $200 for office stationery Dr CASH a/cCr Stationery $200 DrSTATIONERY a/cCr Cash $200

  18. b) Bought goods worth $500 using cash Dr CASH a/cCr Purchases $500 DrPURCHASES a/cCr Cash $500

  19. c) Sold goods for cash $800 Dr CASH a/cCr Sales $800 DrSALES a/cCr Cash $800

  20. d) Closing stock counted is worth $8000 Dr STOCK Cr Trading $8000 DrTRADING a/cCr Stock $8000

  21. e) The owner drew out cash $1500 for personal use. Dr DRAWINGS a/cCr Cash $1500 DrCASH a/cCr Drawings $1500

  22. 3 things that you have learnt today… 2 questions that you may want to ask… 1 thing that you still have problem understanding… Summary - 3 2 1 RULE…