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Double Entry
  System 2



    DR         CR
An Overview…
    General               Special
    Journal               Journals



        Ledger Accounts


          Trial Balance


          Adjustments


Prepare Simple Financial Statements
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.
LEDGER BOOK

Account   Account
What is an Account ?
An account is a brief and
  systematic record of
 transactions which are
    similar in nature.
‘ T’ format
Dr   NAME OF ACCOUNT          Cr

     DEBIT          CREDIT

     Left            Right
      side             side
‘ T’ format
Dr   ASSETS ACCOUNT     Cr


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


     DEBIT      CREDIT
‘ T’ format
Dr   LIABILITY ACCOUNT   Cr


     DEBIT      CREDIT
D OUBLE - E NTRY
   ACCOUNTING SYSTEM


       Every business
transaction  will involve
       two parties
Each party must give up
something ( out) in order
            out
to receive something
      in return. ( in)
                   in
Example:

When the business sells its goods for cash, it
will give up its goods to its customer and
will receive cash in return.

                   Cash
                            IN


                     Goods
                      OUT
                                      Firm
 Firm’s goods
Example:

 When a business purchase goods with cash,
 it will give up its cash to its suppliers and
 will receive goods in return.

                   Goods
                             IN


                     Cash
                      OUT             Firm
Supplier’s goods
Example:

When a business purchase a motor vehicle,
it will give up its cash to the seller and will
receive motor vehicle in return.

                     Motor
                   Vehicle

                      IN
                    Cash
                     OUT              Firm
Motor Vehicle
Example:

When a debtor pays to the firm, the firm’s cash
will increase and the firm’s debtors will decrease.



                Debtors
               decreases



                        Cash
   Debtor                                   Firm
                        increases
Example:

When the firm pays to the creditors, the firm’s
cash will decrease and the firm’s creditors will
decrease.

              Creditors
              decreases



                       Cash
  Creditors                              Firm
                       decreases
Hence,
 For every business transaction,
 two accounts will be involved.
  One account will have a debit
  entry and another account will
       have a credit entry.
a) Paid $200 for office

       stationery
Dr        CASH a/c
  Cr
                           $200
              Stationery


Dr      STATIONERY a/c
Cr
Cash   $200
b)   B ought goods worth $500
             using cash
     Dr        CASH a/c
       Cr
                   Purchases $500



     Dr      PURCHASES a/c
     Cr
     Cash   $500
c) Sold goods for cash $800

  Dr         CASH a/c
    Cr
  Sales   $800



  Dr         SALES a/c
  Cr
                 Cash    $800
d)     Closing stock counted is

      Drworth   $8000
                   STOCK
     Cr
      Trading$800
             0


       Dr        TRADING a/c
     Cr
                            $8000
                    Stock
e)     The owner drew out cash
       $1500 for personal use.
      Dr       DRAWINGS a/c
     Cr
      Cash   $150
             0


       Dr           CASH a/c
     Cr
                     Drawing $1500
                     s
Summary - 3 2 1        RULE…

     3 things that you have learnt
     today…

     2 questions that you may want
     to ask…


     1 thing that you still have
     problem understanding…

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5 slides6.1

  • 1. Double Entry System 2 DR CR
  • 2. An Overview… General Special Journal 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.
  • 5. What is an Account ? An account is a brief and systematic record of transactions which are similar in nature.
  • 6. ‘ T’ format Dr NAME OF ACCOUNT Cr DEBIT CREDIT Left Right side side
  • 7. ‘ T’ format Dr ASSETS ACCOUNT Cr DEBIT CREDIT
  • 8. ‘ T’ format Dr OWNER’S EQUITY ACCOUNT Cr DEBIT CREDIT
  • 9. ‘ T’ format Dr LIABILITY ACCOUNT Cr DEBIT CREDIT
  • 10. D OUBLE - E NTRY ACCOUNTING SYSTEM Every business transaction will involve two parties Each party must give up something ( out) in order out to receive something in return. ( in) in
  • 11. Example: When the business sells its goods for cash, it will give up its goods to its customer and will receive cash in return. Cash IN Goods OUT Firm Firm’s goods
  • 12. Example: When a business purchase goods with cash, it will give up its cash to its suppliers and will receive goods in return. Goods IN Cash OUT Firm Supplier’s goods
  • 13. Example: When a business purchase a motor vehicle, it will give up its cash to the seller and will receive motor vehicle in return. Motor Vehicle IN Cash OUT Firm Motor Vehicle
  • 14. Example: When a debtor pays to the firm, the firm’s cash will increase and the firm’s debtors will decrease. Debtors decreases Cash Debtor Firm increases
  • 15. Example: When the firm pays to the creditors, the firm’s cash will decrease and the firm’s creditors will decrease. Creditors decreases Cash Creditors Firm decreases
  • 16. Hence, For every business transaction, two accounts will be involved. One account will have a debit entry and another account will have a credit entry.
  • 17. a) Paid $200 for office stationery Dr CASH a/c Cr $200 Stationery Dr STATIONERY a/c Cr Cash $200
  • 18. b) B ought goods worth $500 using cash Dr CASH a/c Cr Purchases $500 Dr PURCHASES a/c Cr Cash $500
  • 19. c) Sold goods for cash $800 Dr CASH a/c Cr Sales $800 Dr SALES a/c Cr Cash $800
  • 20. d) Closing stock counted is Drworth $8000 STOCK Cr Trading$800 0 Dr TRADING a/c Cr $8000 Stock
  • 21. e) The owner drew out cash $1500 for personal use. Dr DRAWINGS a/c Cr Cash $150 0 Dr CASH a/c Cr Drawing $1500 s
  • 22. Summary - 3 2 1 RULE… 3 things that you have learnt today… 2 questions that you may want to ask… 1 thing that you still have problem understanding…