aat level 2 certificate in accounting louise johnson louise.johnson@eastdurham. ac.uk
TRANSCRIPT
Chapter 3
Double entry bookkeeping
Slide 3
Double entry
• For every transaction in business 2 entries will be made
• A company makes a sale to a customer and receives in return a payment in cash.
• The business has to record both the sales and the receipt of money hence; the double entry
Slide 4
Debits and credits
• Double entry is recorded by way of a debit and a credit in a T account
• Debit Credit
Slide 5
• The debit will always appear on the left and the credit will always appear on the right
• This will NEVER change
• To remember this;
• Debit Drive on the left
• Credit Crash on the right
Slide 6
Principles of Double Entry Bookkeeping: DEAD CLIC
Debit Credit
Expense Liability
Asset Income
Drawings Capital
Types of Transactions – Debit Entries
• Expenses – Revenue Expenditure
– Rent– Wages– Purchases
• Assets – Capital expenditure and Existing assets
• Bank
– Machinery– Debtors
• Drawings
– Money taken by the owner for his own personal use
Slide 7
Types of Transactions – Credit entries
• Liabilities – Money owed by the business
– Creditors– Loans
• Income – Revenue (not money)
– Sales– Interest received
• Capital – Money invested by the owner
– Capital introduced
Slide 8
Remember!
• Transactions get BIGGER on these sides
Slide 9
Debit Credit
Expense Liability
Asset Income
Drawings Capital
Slide 10
Example 1 Cash Sales of £200
£
sales 200
Debit Credit
£cash 200
Debit Credit
Sales
Cash
Slide 11
Ex 2 Capital introduced to Bank £20000
Debit Credit
£
Debit Credit
Bank
Capital
20X2 £1st July capital 20000
£1st July cash 20000
MAIN LEDGER
Slide 12
Purchases made £250 by cheque
Debit Credit
Debit Credit
Bank
Purchases
20X2 £1st July capital 20000
£2nd July purchases 250
£2nd July bank 250
Slide 13
Rent Paid by cheque £225
Debit Credit
£2nd July purchases 250
Debit Credit
Bank
Rent
20X2 £1st July capital 20000
£
3rd July rent 225
£3rd July bank 225
Slide 14
Cash sales £657
Debit Credit
£
Debit Credit
Cash
Sales
20X2 £4th July sales 657
£4th July cash 657
£
Slide 15
Rates paid by cheque £135
Debit Credit
£2nd July purchases 250
Debit Credit
Bank
Rates
20X2 £1st July capital 20000
£
3rd July rent 225 4th July rates 135
£ 4th July bank 135
Slide 16
Sold goods on Credit to J Henry £750
£
5th July sales 750
Debit Credit
£4th July cash 657
Debit Credit
Sales
Debtors
20X2 £
£
5th July J Henry 750
Slide 17
Bought goods on credit C Bableton £450
£
Debit Credit £
Debit Credit
Purchases
Creditors
20X2 £2nd July bank 250
£5th July purchases 450
5th July C Bableton 450