mr mcclurg double entry book-keeping 1. objectives for today’s lesson! you should understand the...

Mr McClurg

Double entry book-keeping

1

Objectives for today’s lesson!You should understand the purposes of

accounting recordsYou should understand what we mean

by double entry book-keepingYou should understand what we mean

by the accounting equation

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Why accounting?Let’s use our new textbook!!!! Page 1-2Many any notes here that are important

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Double Entry!Essentially there are two events to every

transaction If you buy a car for £16,000 from your

bank account, then You gain:

You lose:When we say we gain something we debit

(DR) this to our accounts When we say we lose something we credit

(CR) this to our accountsPlace the Dr and Cr in the above example!

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Double Entry (2)For every debit there is a credit, and for

every credit there is a debitFUNDAMENTAL RULE!!!!!

They come from the Latin wordsDepere (meaning “to owe”) – abbreviated Credere (meaning “to believe”) – abbreviated

Latin – language in the times of the 15th century Italian double entry system

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Double Entry (3)We can increase the value of an account,

depending upon what type of account we are dealing with:

Note if you wanted to decrease the value of an account, then you place the transaction on the opposite side

DR CR Final Accounts?

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Your turn to work – Worksheet 1

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When answering these questions consider these two important steps!

1.Identify what type of account we are dealing with (asset, liability, revenue, expense)

2.Are we increasing or decreasing their value?

Double entry (4)When we present accounts, we do so using T

Accounts

If this was the Motor Vehicle Account and we bought it for £16,000 in 2009 how should our T Account look?

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Your turn to work (again)!See worksheet 2

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Learning points!

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Remember the Business Entity concept!All personal assets and personal liabilities should

never be included in the business books The business is a separate entity, regardless of what

type of business it is (sole trader, company, partnership)

Fundamental Accounting EquationAssets = Liabilities + Capital (net of profits and

drawings)

Technically Capital/Profits are Liabilities – who does the business owe the “capital” and “profits” to?

Homework

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Using worksheet 2 answer:Draft a Trial Balance for Jake’s newsagentsDraft a Profit and Loss Account and Balance

Sheet for the month of January 2010Make a list of what types of errors are not

identified by the Trial Balance (hint: there are 6)

Summary – in your own words answer the following

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What is the Business Entity Concept?

If I wanted to increase the value of an expense account, which side should I put the entry; Debit or Credit?

What do we mean by the accounting equation?