The Accounting Concepts The Double Entry System.ppt
1. The Double Entry System
Assets
Cash at bank
Shop
Inventory
Account
receivable
Capital
£
28,000
32,000
6,400
600
60,000
Account
payable
(7,000)
60,000 Assets
Cash at bank
Shop
Inventory
Account receivable
Capital
£
28,400
32,000
6,000
600
60,000
Account
payable
(7,000)
60,000
Mr Black sells some
inventory for £400, and
receives the payment
instantly.
Double Entry Book-Keeping
is based upon the idea that
every transaction affects
two aspects
2. The accounts for double entry
An ‘account’ is a record of all transactions in particular
departments in a business.
4. The accounts for double entry
If a business buys stationary valued at £40 and pays for it using cash, then
two things have happened.
1.The value in the business’s cash account will have decreased by £40
2.The value in the business’s stationary account has increased by £40
Dr Cr
IN OUT
Example: Paid cash for a van costing £3,000
Van comes IN to the Business (debit the van account)
The cash goes OUT of the business (credit the cash account)
5. The accounts for double entry
Dr Cr
VAN account
Example: Paid cash for a van costing £3,000
Van comes IN to the Business (debit the van account)
The cash goes OUT of the business (credit the cash account)
Dr Cr
Cash account
Cash £3,000 Van £3,000
Dr Cr
Cash account
Dr
Capital account
The owner starts the business with £10,000 in cash.
6. Dr Cr
Equipment account
Dr Cr
B.B Company account
Equipment is bought on credit from ‘B.B Company’ for £1,250
You have paid the B.B Company the £1,250.
Dr Cr
B.B Company account
Dr Cr
Cash account
7. Now complete the double accounting work sheet
Cut the margins
Stick in book
8. Homework –
Make and complete accounts using the following information.
Jan 1 – Started Business with £30,000 in bank
Jan 5 – Bought stock of goods paying £2,770 cheque
Jan 7 – Bought a van, £4,800 cheque
Jan 9 – Sold goods for £680 cash
Jan 10 - Bought desk & chair for the office for £110 cash
Jan 15 – Sold goods for £500 cheque
Jan 22 - Paid £92 cash for motor expenses
Jan 29 Sold goods for £325 cash
Jan 30 – Bought more goods, paid £1090 cheque
