Chapter 2 The double entry system for assets, liabilities and capital
description
Transcript of Chapter 2 The double entry system for assets, liabilities and capital
![Page 1: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/1.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.1
Chapter 2The double entry system for assets, liabilities and capital
![Page 2: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/2.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.2
Learning objectivesAfter you have studied this chapter, you should
be able to:Explain what is meant by ‘double entry’Explain how the double entry system follows
the rules of the accounting equationExplain why each transaction is recorded into
individual accountsDescribe the layout of a ‘T-account’
![Page 3: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/3.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.3
Learning objectives (Continued)Explain what is meant by the terms debit and
creditExplain the phrase ‘debit the receiver and
credit the giver’Prepare a table showing how to record
increases and decreases of assets, liabilities and capital in the accounts
Enter a series of transactions into T-accounts
![Page 4: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/4.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.4
The double entry systemEvery transaction affects two
items.
These effects need to be shown in the accounting books.
This is double entry bookkeeping.
![Page 5: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/5.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.5
A double entry account
![Page 6: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/6.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.6
How recording in an accountaffects items
![Page 7: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/7.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.7
Or, to see this in the accounts
![Page 8: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/8.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.8
ActivityThe owner starts the business with £10,000 in cash on 1 August 2012.
![Page 9: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/9.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.9
Activity (Continued)A van is bought for £4,500 in cash on 2 August 2012.
![Page 10: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/10.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.10
Activity (Continued)
![Page 11: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/11.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.11
Activity (Continued)Fixtures (e.g. shelves) are bought on credit from Shop Fitters for £1,250 on 3 August 2008.
![Page 12: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/12.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.12
Activity (Continued)
![Page 13: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/13.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.13
Activity (Continued)Paid the amount owning to Shop Fitters in cash on 17 August 2012.
![Page 14: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/14.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.14
Activity (Continued)
![Page 15: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/15.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.15
Activity (Continued)Combining all four of these transactions, the accounts now contain:
![Page 16: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/16.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.16
Activity
![Page 17: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/17.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.17 Activity (Continued)
![Page 18: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/18.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.18 Activity (Continued)
![Page 19: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/19.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.19
Activity (Continued)
![Page 20: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/20.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.20
Learning outcomesYou should have now learnt:1.That double entry follows the rules of the
accounting equation2.That double entry maintains the principle
that every debit has a corresponding credit entry
3.That double entries are made in accounts in the accounting books
![Page 21: Chapter 2 The double entry system for assets, liabilities and capital](https://reader033.fdocuments.us/reader033/viewer/2022061602/56815f46550346895dce221d/html5/thumbnails/21.jpg)
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012
Slide 2.21
Learning outcomes (Continued)4. Why each transaction is entered into
accounts rather than directly into the statement of financial position
5. How transactions cause increases and decreases in asset, liability and capital accounts
6. How to record transactions in T-accounts