Book keeping step by step for dummies

4. Double-Entry Accounting “ Double-entry accounting is based on a simple concept: each party in a business transaction will receive something and give something in return. In bookkeeping terms, what is received is a debit or X and what is given is a credit or Y. The T account is a representation of a scale or balance.” Scale or Balance Receive DEBIT Give CREDIT T account Left Side Receive DEBIT Right Side Give CREDIT

5. SSNN Ltd. “ On November 1, 2005, Arun started a project called SSNN Ltd. . Arun plan to use his knowledge of microcomputers and offer computer consulting services for a fee. The following double-entry transactions show how amounts received (debits or X) always equal amounts given (credits or Y).” Arun is Owner

6. Business Transactions General Journal give Credit SSNN ltd. (investee) X (investor) give Credit Entry A. Date Description Debit Credit 11/1 Arun deposits $ 25,000 in a bank account for SSNN ltd. in exchange for Shares. receive Debit

7. Arun deposits $25,000 in a bank account for SSNNL in exchange for Share Capital. Business Transactions General Journal give Credit SSNNL (investee) Cash X (investor) give Credit Entry A. Date Description Debit Credit 11/1 Cash 25,000 receive Debit

8. Business Transactions General Journal Date Description Debit Credit 11/1 Cash 25,000 Shares 25,000 give Credit SSNNL (investee) Cash Capital Stock X (investor) give Credit Entry A. Arun started project SSNNL from cash of Rs. 25,000 receive Debit

9. SSNNL buys land for $20,000. Business Transactions give Credit SSNNL (buyer) Land Owner (seller) give Credit Entry B. General Journal Date Description Debit Credit 11/5 receive Debit

10. SSNNL buys land for $20,000. Business Transactions give Credit SSNNL (buyer) Land Land Owner (seller) give Credit Entry B. General Journal Date Description Debit Credit 11/5 Land 20,000 receive Debit

11. SSNNL buys land for $20,000. Business Transactions give Credit SSNNL (buyer) Land Cash Land Owner (seller) give Credit Entry B. General Journal Date Description Debit Credit 11/5 Land 20,000 Cash 20,000 receive Debit

12. SSNNL buys supply / goods for $1,350, agreeing to pay in the near future.** Business Transactions give Credit SSNNL (buyer) Supplier (seller) give Credit Entry C. General Journal Date Description Debit Credit 11/10 receive Debit

13. SSNNL buys supplies for $1,350, agreeing to pay in the near future.** Business Transactions give Credit SSNNL (buyer) Supplies Supplier (seller) give Credit Entry C. General Journal Date Description Debit Credit 11/10 Supplies/goods 1,350 receive Debit

14. SSNNL buys supplies for $1,350, agreeing to pay in the near future.** Business Transactions give Credit SSNNL (buyer) Supplies Supplier (seller) give Credit Entry C. A promise to pay later General Journal Date Description Debit Credit 11/10 Supplies 1,350 Accounts Payable 1,350 receive Debit

15. SSNNL earns fees of $7,500, receiving cash. Business Transactions give Credit SSNNL (seller) Customer (buyer) give Credit Entry D. General Journal Date Description Debit Credit 11/18 receive Debit

16. SSNNL earns fees of $7,500, receiving cash. Business Transactions give Credit SSNNL (seller) Cash Customer (buyer) give Credit Entry D. General Journal Date Description Debit Credit 11/18 Cash 7,500 receive Debit

17. SSNNL earns fees of $7,500, receiving cash. Business Transactions give Credit SSNNL (seller) Cash Customer (buyer) give Credit Entry D. Services General Journal Date Description Debit Credit 11/18 Cash 7,500 Fees Earned 7,500 receive Debit

18. Date Description Debit Credit SSNNL paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. Business Transactions General Journal give Credit SSNNL (buyer) Various suppliers give Credit Entry E. receive Debit

19. Date Description Debit Credit 11/18 Wages Expense 2,125 Rent Expense 800 Utilities Expense 450 Misc. Expense 275 SSNNL paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. Business Transactions General Journal give Credit SSNNL (buyer) Services, benefits Various suppliers give Credit Entry E. receive Debit

20. Date Description Debit Credit 11/18 Wages Expense 2,125 Rent Expense 800 Utilities Expense 450 Misc. Expense 275 Cash 3,650 SSNNL paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. Business Transactions General Journal give Credit SSNNL (buyer) Services, benefits Various suppliers give Credit Entry E. Cash receive Debit

21. SSNNL pays $950 to creditors on account. Business Transactions give Credit SSNNL (payor) Supplier (payee) give Credit Entry F. General Journal Date Description Debit Credit 11/30 receive Debit

22. SSNNL pays $950 to creditors on account. Business Transactions give Credit SSNNL (payor) Reduction in obligation Supplier (payee) give Credit Entry F. General Journal Date Description Debit Credit 11/30 Accounts Payable 950 receive Debit

23. SSNNL pays $950 to creditors on account. Business Transactions give Credit SSNNL (payor) Reduction in obligation Supplier (payee) give Credit Entry F. Cash General Journal Date Description Debit Credit 11/30 Accounts Payable 950 Cash 950 receive Debit

24. At the end of the month, the cost of supplies/goods on hand is $550. ** Business Transactions give Credit SSNNL (user) Internal Transaction (no external entity) give Credit Entry G. General Journal Date Description Debit Credit 11/30 receive Debit

25. At the end of the month, the cost of supplies/goods on hand is $550.** Business Transactions give Credit SSNNL (user) Use of supplies Internal Transaction (no external entity) give Credit Entry G. General Journal Date Description Debit Credit 11/30 Supplies Expense 800 receive Debit Balance of Supplies account $1,350 less $550 on hand = $800 used

26. At the end of the month, the cost of supplies/goods on hand is $550.** Business Transactions give Credit SSNNL (user) Use of supplies Internal Transaction (no external entity) give Credit Entry G. Supplies General Journal Date Description Debit Credit 11/30 Supplies Expense 800 Supplies 800 receive Debit Balance of Supplies account $1,350 less $550 on hand = $800 used

27. SSNNL paid dividends of $2,000. Business Transactions give Credit SSNNL (payer) X (stockholder) give Credit Entry H. General Journal Date Description Debit Credit 11/30 receive Debit

28. Business Transactions give Credit SSNNL (payer) Reduction in equity X (stockholder) give Credit Entry H. General Journal Date Description Debit Credit 11/30 Dividends 2,000 SSNNL paid dividends of $2,000. receive Debit

29. Business Transactions give Credit SSNNL (payer) Reduction in obligation X (stockholder) give Credit Entry H. Cash General Journal Date Description Debit Credit 11/30 Dividends 2,000 Cash 2,000 SSNNL paid dividends of $2,000. receive Debit

30. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 2,400 Cash 2,400 General Journal Page 1 Recording and Posting an Entry

31. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 2,400 Cash 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 12/1 Account: Prepaid Insurance Account No. 15 General Journal General Ledger Page 1 Recording and Posting an Entry Enter the transaction date in the ledger account. 1 1

32. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 2,400 Cash 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 12/1 1 2,400 Account: Prepaid Insurance Account No. 15 General Journal General Ledger Page 1 Recording and Posting an Entry Enter the debit amount in the ledger debit column. 2 2

33. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 2,400 Cash 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 12/1 1 2,400 2,400 Account: Prepaid Insurance Account No. 15 General Journal General Ledger Page 1 Recording and Posting an Entry Update the ledger account balance. 3 3

34. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 2,400 Cash 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 12/1 1 Account: Prepaid Insurance Account No. 15 General Journal General Ledger Page 1 Recording and Posting an Entry 4 Enter the journal page in the ledger account. 4

35. Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 15 2,400 Cash 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 12/1 1 2,400 2,400 Account: Prepaid Insurance Account No. 15 General Journal General Ledger Page 1 Recording and Posting an Entry Enter the ledger account number in the journal. 5 5

36. Recording and Posting an Entry Post. Date Description Ref. Debit Credit 12/1 Prepaid Insurance 15 2,400 Cash 11 2,400 Post. Balance Date Item Ref. Debit Credit Debit Credit 11/30 Balance 5,900 12/1 1 2,400 3,500 Account: Cash Account No. 11 General Journal General Ledger Page 1 All five parts of the credit posting are shown. 1 5 2 3 4

37. Correcting Errors Three Types of Errors Journal Entry Ledger Posting Correction Procedure 1. incorrect not posted correct Journal

38. Correcting Errors Three Types of Errors Journal Entry Ledger Posting Correction Procedure 1. incorrect not posted correct Journal 2. correct incorrectly posted correct Ledger

39. SSNNL Trial Balance November 30, 2002 11 Cash 5,900 14 Supplies 550 17 Land 20,000 21 Accounts Payable 400 31 Capital Stock 25,000 33 Dividends 2,000 41 Fees Earned 7,500 51 Wages Expense 2,125 52 Rent Expense 800 54 Utilities Expense 450 55 Supplies Expense 800 59 Miscellaneous Expense 275 32,900 32,900

40. SSNNL Trial Balance November 30, 2002 11 Cash 5,900 14 Supplies 550 17 Land 20,000 21 Accounts Payable 400 31 Share Capital 25,000 33 Dividends 2,000 41 Fees Earned 7,500 51 Wages Expense 2,125 52 Rent Expense 800 54 Utilities Expense 450 55 Supplies Expense 800 59 Miscellaneous Expense 275 32,900 32,900 Balance Sheet

41. Income Statement SSNNL Trial Balance November 30, 2002 11 Cash 5,900 14 Supplies 550 17 Land 20,000 21 Accounts Payable 400 31 Capital Stock 25,000 33 Dividends 2,000 41 Fees Earned 7,500 51 Wages Expense 2,125 52 Rent Expense 800 54 Utilities Expense 450 55 Supplies Expense 800 59 Miscellaneous Expense 275 32,900 32,900

42. SSNNL Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 2. Liabilities 21 Accounts Payable 23 Unearned Rent 3. Owner’s Equity 31 Capital Stock 32 Retained Earnings 33 Dividends 4. Revenue 41 Fees Earned 5. Expenses 51 Wages Expense 52 Rent Expense 54 Utilities Expense 55 Supplies Expense 59 Miscellaneous Expense