Week 3

Double entry
bookkeeping
Prepared by: Ms Doris

2-1
Double entry
The double-entry accounting system recognizes
both the debit and credit side of a business
transaction.
double-entry accounting
A system used to analyze and record
a transaction.

debit
An entry on the left side of an account.

credit
An entry on the right side of an
account.

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 Double-Entry
Accounts and the Double-Entry
Section 4.1
Accounting System
The T account gets its name from being shaped
like a T.

T-account
A visual representation of a
ledger account. The T account
is a tool used to analyze
transactions.

Glencoe Accounting

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 Double-Entry
Accounts and the Double-Entry
Section 4.1
Accounting System

normal balance
The increase side of an account.
The word normal here means usual.

Glencoe Accounting

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 Double-Entry
Accounts and the Double-Entry
Section 4.1
Accounting System

Rules for Asset & Expenses Accounts

It is increased on the debit side (left side).

It is decreased on the credit side (right side).

The normal balance is the increase or

debit side.

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 Double-Entry
Accounts and the Double-Entry
Section 4.1
Accounting System
Rules for Liability, Owner’s Capital and
Revenue Accounts

It is increased on the credit side (right side).

It is decreased on the debit side (left side).

The normal balance is the increase or

credit side.
Glencoe Accounting

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Double-Entry

2-7
Double entry
• There are at least two entries for each
transaction: an amount is recorded as a
debit with a corresponding amount being
recorded as a credit.

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 Exercise Question:
Identify the normal balance for each of the
following accounts by indicating Debit or Credit.
Cash in Bank Accounts Payable
Accounts Receivable Inventory
Richard Sims, Capital Building
Office Supplies Long Term Loan from Bank
Car Wash Equipment Computer Equipment
Drawings Petty cash

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 Business Transaction
Analysis
Applying the Rules of Debit
Section 4.2
and Credit

Apply the rules of debit

and credit.
When analyzing business
transactions, you should
Complete the entry in
T-account form.

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The Accounting Cycle
Week 3 Week 12

Week 5

Week 3

Week 4

2 - 11
Flow of information
Source documents:
Invoices Credit notes
Cheque Bank-in slip
Cash receipts Bank Statements
Petty Cash Vouchers
Other Key Documents (Delivery notes, Purchase
orders, Remittance advice notes, Statement of
account)

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Invoices
• Invoices are created when there is a sale
or a purchase for the goods or services.
• An invoice is a demand for payment.
• An invoice will have the following
information:

Copyright  2004 McGraw-Hill Australia Pty Ltd

PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by
Jopling, Lucas and Norton
Slides prepared by Rick Nieuwenhoven 2 - 13
Credit Notes
• A credit note is used by a seller to cancel
part or all of previously issued invoice(s).
• For example, due to a calculation error, an
incorrect delivery, damage to the goods,
returned goods or goods lost in transit.
Cheque
• Cheque counterfoils will have information of
payments made from the business bank
account.
• The details to be recorded are:
Bank-in slip
• form supplied by a bank for a depositor to
fill out
• The teller keeps the deposit slip along with
the deposit (cash and cheques), and
provides the depositor with a receipt.

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2 - 20
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Cash Receipts
• When a cash or cheques are received by a
business, a receipt will be issued.
• May be in the computerized form or a
handwritten receipt.
Bank Statements
• Payments and receipts may be debited or
credited directly through the bank account.
• The bank statement will become a source
document when this occurs:
a) Direct Debits
b) Standing Orders
c) Bank interest and charges
d) Credit Transfers
Petty Cash Vouchers
• When small payments are made in cash, a
voucher should be made out.
• The details included are:

• This vouchers should be signed by an

authorised person and a receipt is to be
attached to it.
Flow of information (Week 12)

Types of journals:

• general journal

• specialised journals

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Flow of information
Types of ledgers:

• general ledgers

• subsidiary ledgers

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Flow of information
• The Trial Balance
– shows all the balances of the accounts in the
General Ledger
– is the basis for the preparation of the financial
statements.

• The Statement of Financial Performance

– shows the financial performance of the business.

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Ledgers
• T ̵ Account

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Trial Balance

Trial Balance assists in finding:

• arithmetic error
• recording only half of an entry.

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 Exercise Question:
May 1 Started in business with capital of £2,500 which was paid into
the bank
May 2 Bought goods on credit from the following: D.Ellis £540, C.Mendez £87
and K.Gibson £76

May 4 Sold goods on credit to: C.Baily £430, B.Hughes £62, H.Spencer £176
May 6 Sold goods for cash £500
May 8 Paid rent by cash, £120
May 9 C.Baily paid us £250 by cheque
May 10 H.Spencer paid us £150 by cheque
May 12 We paid the following by cheque: K.Gibson £76, D.Ellis £370
May 15 Bought stationary for cash £60
May 18 Bought goods on credit from D.Ellis £145, C.Mendez £234
May 19 Paid rent by cash £120
May 25 Sold goods on credit to C.Baily £90, BHughes £110 and H.Spencer
£128
May 31 Paid C.Mendez £87 by cheque

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