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ACC106
       Chapter 3

PRINCIPLES OF DOUBLE ENTRY

 ( THE RECORDING PROCESS)
LEARNING OBJECTIVES
3.1 Introduction
DOUBLE ENTRY PRINCIPLES
Classification                        DEBIT                      CREDIT
Assets                    increase in Assets           decrease in Assets

Liability                 decrease in Liabilities      increase in Liabilities

Capital/ Owner’s equity   decrease in Owner’s Equity   increase in Owner’s Equity

Revenue                   decrease in Revenue          increase in Revenue

Expenses                  increase in Expenses         decrease in Expenses
DOUBLE ENTRY PRINCIPLES FOR ASSETS
    The double entry principle for assets is:
                                             Assets a/c
                        Debit                                     Credit
            To record increase in Assets               To record decrease in Assets


    i.e Jan 1 Bought equipment paying by cheque RM 1,000
              Dr. Equipment a/c        RM 1,000
                    Cr. Bank a/c            RM 1,000
                                           Equipment a/c
    Jan 1    Bank                      1,000
                                               Bank a/c
                                                  Jan 1    Equipment          1,000
DOUBLE ENTRY PRINCIPLES FOR
                     LIABILITIES
    The double entry principle for liabilities is:
                                           Liabilities a/c
                         Debit                                     Credit
            To record decrease in Liabilities         To record increase in Liabilities


    i.e Jan 2 Bought equipment on credit from Streamyx Sdn. Bhd. RM 2,000
               Dr. Equipment a/c        RM 2,000
                     Cr. Creditor a/c – Streamyx Sdn. Bhd. RM 2,000
                                            Equipment a/c
    Jan 2     Creditor                  2,000
                                 Creditor a/c – Streamyx Sdn. Bhd a/c
                                                   Jan 2     Equipment          2,000
DOUBLE ENTRY PRINCIPLES FOR
                 OWNER’S EQUITY
    The double entry principle for Owner’s Equity is:
                                      Owner’s Equity a/c
                      Debit                                     Credit
       To record decrease in Owner’s Equity      To record increase in Owner’s Equity


    i.e Jan 1 The owner started business with RM 10,000 cash in bank
             Dr. Bank a/c            RM 10,000
                  Cr. Capital a/c.       RM 10,000
                                              Bank a/c
    Jan 1   Capital                  10,000
                                          Capital a/c
                                                 Jan 1     Bank                    10,000
DOUBLE ENTRY PRINCIPLES FOR
                   EXPENSES
I) The double entry principle for Expenses is:
                                         Expenses a/c
                      Debit                                      Credit
          To record increase in Expenses             To record decrease in Expenses


  i.e Jan 6 Paid salary by cheque RM 300
            Dr. Salary a/c          RM 300
                  Cr. Bank a/c.        RM 300
                                             Salary a/c
  Jan 6    Bank                        300
                                           Bank a/c
                                                  Jan 6 Salary                        300
DOUBLE ENTRY PRINCIPLES FOR
                   REVENUE
II) The double entry principle for Revenue is:
                                         Revenue a/c
                     Debit                                     Credit
          To record decrease in Revenue             To record increase in Revenue


  i.e Jan 8 Received cash for house rental RM 450
            Dr. Cash a/c           RM 450
                 Cr. Rent Received a/c.         RM 450
                                           Cash a/c
  Jan 8    Rent received                  450
                                    Rent Received a/c
                                           Jan 8            Cash                    450
DOUBLE ENTRY PRINCIPLES FOR STOCK
   The double entry are as follows:
           Transactions                       Effects                Double entry
          Purchased of goods       Purchase Expense Increase       Debit Purchases a/c

            Sales of goods             Sales Revenue Increase        Credit Sales a/c

          Purchases Returns        Purchase Expense decrease    Credit Purchase Returns a/c

            Sales Returns              Sales Revenue decrease     Debit Sales Return a/c
Example
Transactions                    Effects                       Double entry
Purchased goods:                Purchase Expense Increase     DR Purchases a/c
Purchased goods on credit       Liability creditor increase   CR Creditor (Siti) a/c
from Siti Ent
Sales of goods:                 Sales Revenue Increase        DR Debtor (Zila) a/c
Credit Sales to Zila            Asset debtor increase         CR Sales a/c
Purchases Returns:              Liability creditor decrease   DR Creditor (Siti) a/c
Returned goods to Siti          Purchase Expense decrease     CR Purchase Returns a/c
Enterprise
Sales Returns:                  Sales Revenue decrease        DR Sales Return a/c
Zila returned defective goods   Asset debtor decrease         CR Debtor (Zila) a/c
DOUBLE ENTRY PRINCIPLES FOR STOCK
             (cont’d)
                                         Purchases a/c
Jan 6 Creditor - Siti Enterprise 2, 000
                                     Creditor - Siti Enterprise a/c
                                              Jan 6        Purchases     2,000
i.e 2. Jan 7 Returned goods to Siti Enterprise RM 100
Journal entries
Dr. Creditor - Siti Enterprise     RM 100
          Cr.   Purchases Return a/c RM 100
                                 Creditor - Siti Enterprise a/c
Jan 7 Purchases Return             100          Jan 6    Purchases     2,000
                                      Purchases Return a/c
                                               Jan 7       Creditor       100
DOUBLE ENTRY PRINCIPLES FOR STOCK
             (cont’d)
i.e 3. Jan 8 Credit Sales to Zila RM 400
Journal entries
Dr. Debtor – Zila a/c           RM 400
          Cr.       Sales a/c            RM 400


                                     Debtor – Zila a/c
Jan 8     Sales                      400


                                           Sales a/c
                                               Jan 8 Debtor - Zila   400
DOUBLE ENTRY PRINCIPLES FOR STOCK
              (cont’d)
i.e 4. Jan 15 Zila returned defective goods worth RM 40
Journal entries
Dr. Return Inwards a/c         RM 40
         Cr.           Debtor – Zila a/c RM 40


                                    Return Inwards a/c
Jan 15 Debtor – Zila                40

                                    Debtor – Zila a/c
Jan 8    Sales                     400           Jan 15   Return Inwards   40
DOUBLE ENTRY PRINCIPLES FOR STOCK
              (cont’d)
i.e 5. Jan 17 Bought goods from Jenny paying by cheque RM 400
Journal entries
Dr. Purchases a/c   RM 400
         Cr.        Bank a/c        RM 400


                                   Purchases a/c
Jan 17   Bank                    400

                                     Bank a/c
                                                Jan 17   Purchases   400
DOUBLE ENTRY PRINCIPLES FOR STOCK
              (cont’d)
i.e 6. Jan 19 Cash sales to Ali Baba RM 240
Journal entries
Dr. Cash a/c       RM 240
         Cr.        Sales a/c         RM 240


                                         Cash a/c
Jan 19   Sales                     240

                                         Sales a/c
                                                     Jan 19   Cash   240
TRANSPORTATION COST FOR
          PURCHASE & SALES OF GOODS
Transportation Costs            DOUBLE ENTRY               ACCOUNT TO RECORD
Freight or carriage             DR Carriage outwards a/c             Trading a/c
outwards:                       CR Cash/ Bank a/c          (as part of the cost of goods
The cost of transport paid to                              purchased)
send the goods sold to the
buyer’s premises


Freight or carriage             D R Carriage inwards a/c         Profit & Loss a/c
inwards:                        C R Cash/ Bank a/c         (expenses)
The cost of transport paid to
bring in the goods bought to
the business premises
DOUBLE ENTRY PRINCIPLES FOR
      TRADE DISCOUNT
DOUBLE ENTRY PRINCIPLES FOR TRADE
         DISCOUNT (cont’d)
 Journal entries
 Dr. Purchases a/c RM 1,900
          Cr.      Creditor - Teepah Trading RM 1,900
                               Purchases a/c
 Jan 25 Creditor – Teepah Trading 1,900


                       Creditor - Teepah Trading a/c
                                          Jan 25       Purchases   1,900
DOUBLE ENTRY PRINCIPLES FOR
      CASH DISCOUNT
DOUBLE ENTRY PRINCIPLES FOR
        CASH DISCOUNT
                    Journal entry 1           Journal entry 2
Discount Received   DR Creditor a/c           DR Creditor a/c
                    CR Discount Receive a/c   CR bank a/c


Discount Allowed    DR Discount Allowed a/c   DR Bank a/c
                    CR Debtor a/c             CR Debtor
DOUBLE ENTRY PRINCIPLES FOR
        CASH DISCOUNT
Example:                  Journal entry 1           Journal entry 2
Discount Received:        DR Creditor (Jenny) a/c   DR Creditor (Jenny) a/c
Paid supplier - Jenny      RM38                      RM1862
Trading RM1900 by
cheque after deducting    CR Discount Receive a/c   CR Bank a/c
cash discount 2%           RM38                      RM1862


Discount Allowed          DR Discount Allowed a/c   DR Bank a/c
Ahmad (debtor) paid       RM60                      RM2940
RM3,000 by cheque after   CR Debtor a/c             CR Debtor a/c
deducting cash discount   RM60                      RM2940
of 2%
DOUBLE ENTRY PRINCIPLES FOR
      CASH DISCOUNT (cont’d)
                        Creditor – Jenny Trading
Jan31    Discount Received         38     Jan 18        Purchases    1,900
Jan 31   Bank                    1,862
                                 1,900                               1,900
                             Discount Received a/c
                                         Jan 31      Jenny Trading     38
                        Bank a/c
                                          Jan 31     Jenny Trading   1,862
DOUBLE ENTRY PRINCIPLES FOR
      CASH DISCOUNT (cont’d)
                              Debtor - Ahmad
Jan 19   Sales                3,000       Jan 31   Discount allowed     60
                                          Jan 31   Bank               2,940
                                3,000                                 3,000
                           Discount Allowed a/c
Jan 31   Debtor – Ahmad              60
                          Bank a/c
Jan 31   Debtor – Ahmad         2,940

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Ch 4 principles of double entry

  • 1. ACC106 Chapter 3 PRINCIPLES OF DOUBLE ENTRY ( THE RECORDING PROCESS)
  • 4. DOUBLE ENTRY PRINCIPLES Classification DEBIT CREDIT Assets increase in Assets decrease in Assets Liability decrease in Liabilities increase in Liabilities Capital/ Owner’s equity decrease in Owner’s Equity increase in Owner’s Equity Revenue decrease in Revenue increase in Revenue Expenses increase in Expenses decrease in Expenses
  • 5. DOUBLE ENTRY PRINCIPLES FOR ASSETS  The double entry principle for assets is: Assets a/c Debit Credit To record increase in Assets To record decrease in Assets i.e Jan 1 Bought equipment paying by cheque RM 1,000 Dr. Equipment a/c RM 1,000 Cr. Bank a/c RM 1,000 Equipment a/c Jan 1 Bank 1,000 Bank a/c Jan 1 Equipment 1,000
  • 6. DOUBLE ENTRY PRINCIPLES FOR LIABILITIES  The double entry principle for liabilities is: Liabilities a/c Debit Credit To record decrease in Liabilities To record increase in Liabilities i.e Jan 2 Bought equipment on credit from Streamyx Sdn. Bhd. RM 2,000 Dr. Equipment a/c RM 2,000 Cr. Creditor a/c – Streamyx Sdn. Bhd. RM 2,000 Equipment a/c Jan 2 Creditor 2,000 Creditor a/c – Streamyx Sdn. Bhd a/c Jan 2 Equipment 2,000
  • 7. DOUBLE ENTRY PRINCIPLES FOR OWNER’S EQUITY  The double entry principle for Owner’s Equity is: Owner’s Equity a/c Debit Credit To record decrease in Owner’s Equity To record increase in Owner’s Equity i.e Jan 1 The owner started business with RM 10,000 cash in bank Dr. Bank a/c RM 10,000 Cr. Capital a/c. RM 10,000 Bank a/c Jan 1 Capital 10,000 Capital a/c Jan 1 Bank 10,000
  • 8. DOUBLE ENTRY PRINCIPLES FOR EXPENSES I) The double entry principle for Expenses is: Expenses a/c Debit Credit To record increase in Expenses To record decrease in Expenses i.e Jan 6 Paid salary by cheque RM 300 Dr. Salary a/c RM 300 Cr. Bank a/c. RM 300 Salary a/c Jan 6 Bank 300 Bank a/c Jan 6 Salary 300
  • 9. DOUBLE ENTRY PRINCIPLES FOR REVENUE II) The double entry principle for Revenue is: Revenue a/c Debit Credit To record decrease in Revenue To record increase in Revenue i.e Jan 8 Received cash for house rental RM 450 Dr. Cash a/c RM 450 Cr. Rent Received a/c. RM 450 Cash a/c Jan 8 Rent received 450 Rent Received a/c Jan 8 Cash 450
  • 10. DOUBLE ENTRY PRINCIPLES FOR STOCK  The double entry are as follows: Transactions Effects Double entry Purchased of goods Purchase Expense Increase Debit Purchases a/c Sales of goods Sales Revenue Increase Credit Sales a/c Purchases Returns Purchase Expense decrease Credit Purchase Returns a/c Sales Returns Sales Revenue decrease Debit Sales Return a/c
  • 11. Example Transactions Effects Double entry Purchased goods: Purchase Expense Increase DR Purchases a/c Purchased goods on credit Liability creditor increase CR Creditor (Siti) a/c from Siti Ent Sales of goods: Sales Revenue Increase DR Debtor (Zila) a/c Credit Sales to Zila Asset debtor increase CR Sales a/c Purchases Returns: Liability creditor decrease DR Creditor (Siti) a/c Returned goods to Siti Purchase Expense decrease CR Purchase Returns a/c Enterprise Sales Returns: Sales Revenue decrease DR Sales Return a/c Zila returned defective goods Asset debtor decrease CR Debtor (Zila) a/c
  • 12. DOUBLE ENTRY PRINCIPLES FOR STOCK (cont’d) Purchases a/c Jan 6 Creditor - Siti Enterprise 2, 000 Creditor - Siti Enterprise a/c Jan 6 Purchases 2,000 i.e 2. Jan 7 Returned goods to Siti Enterprise RM 100 Journal entries Dr. Creditor - Siti Enterprise RM 100 Cr. Purchases Return a/c RM 100 Creditor - Siti Enterprise a/c Jan 7 Purchases Return 100 Jan 6 Purchases 2,000 Purchases Return a/c Jan 7 Creditor 100
  • 13. DOUBLE ENTRY PRINCIPLES FOR STOCK (cont’d) i.e 3. Jan 8 Credit Sales to Zila RM 400 Journal entries Dr. Debtor – Zila a/c RM 400 Cr. Sales a/c RM 400 Debtor – Zila a/c Jan 8 Sales 400 Sales a/c Jan 8 Debtor - Zila 400
  • 14. DOUBLE ENTRY PRINCIPLES FOR STOCK (cont’d) i.e 4. Jan 15 Zila returned defective goods worth RM 40 Journal entries Dr. Return Inwards a/c RM 40 Cr. Debtor – Zila a/c RM 40 Return Inwards a/c Jan 15 Debtor – Zila 40 Debtor – Zila a/c Jan 8 Sales 400 Jan 15 Return Inwards 40
  • 15. DOUBLE ENTRY PRINCIPLES FOR STOCK (cont’d) i.e 5. Jan 17 Bought goods from Jenny paying by cheque RM 400 Journal entries Dr. Purchases a/c RM 400 Cr. Bank a/c RM 400 Purchases a/c Jan 17 Bank 400 Bank a/c Jan 17 Purchases 400
  • 16. DOUBLE ENTRY PRINCIPLES FOR STOCK (cont’d) i.e 6. Jan 19 Cash sales to Ali Baba RM 240 Journal entries Dr. Cash a/c RM 240 Cr. Sales a/c RM 240 Cash a/c Jan 19 Sales 240 Sales a/c Jan 19 Cash 240
  • 17. TRANSPORTATION COST FOR PURCHASE & SALES OF GOODS Transportation Costs DOUBLE ENTRY ACCOUNT TO RECORD Freight or carriage DR Carriage outwards a/c Trading a/c outwards: CR Cash/ Bank a/c (as part of the cost of goods The cost of transport paid to purchased) send the goods sold to the buyer’s premises Freight or carriage D R Carriage inwards a/c Profit & Loss a/c inwards: C R Cash/ Bank a/c (expenses) The cost of transport paid to bring in the goods bought to the business premises
  • 18. DOUBLE ENTRY PRINCIPLES FOR TRADE DISCOUNT
  • 19. DOUBLE ENTRY PRINCIPLES FOR TRADE DISCOUNT (cont’d) Journal entries Dr. Purchases a/c RM 1,900 Cr. Creditor - Teepah Trading RM 1,900 Purchases a/c Jan 25 Creditor – Teepah Trading 1,900 Creditor - Teepah Trading a/c Jan 25 Purchases 1,900
  • 20. DOUBLE ENTRY PRINCIPLES FOR CASH DISCOUNT
  • 21. DOUBLE ENTRY PRINCIPLES FOR CASH DISCOUNT Journal entry 1 Journal entry 2 Discount Received DR Creditor a/c DR Creditor a/c CR Discount Receive a/c CR bank a/c Discount Allowed DR Discount Allowed a/c DR Bank a/c CR Debtor a/c CR Debtor
  • 22. DOUBLE ENTRY PRINCIPLES FOR CASH DISCOUNT Example: Journal entry 1 Journal entry 2 Discount Received: DR Creditor (Jenny) a/c DR Creditor (Jenny) a/c Paid supplier - Jenny RM38 RM1862 Trading RM1900 by cheque after deducting CR Discount Receive a/c CR Bank a/c cash discount 2% RM38 RM1862 Discount Allowed DR Discount Allowed a/c DR Bank a/c Ahmad (debtor) paid RM60 RM2940 RM3,000 by cheque after CR Debtor a/c CR Debtor a/c deducting cash discount RM60 RM2940 of 2%
  • 23. DOUBLE ENTRY PRINCIPLES FOR CASH DISCOUNT (cont’d) Creditor – Jenny Trading Jan31 Discount Received 38 Jan 18 Purchases 1,900 Jan 31 Bank 1,862 1,900 1,900 Discount Received a/c Jan 31 Jenny Trading 38 Bank a/c Jan 31 Jenny Trading 1,862
  • 24. DOUBLE ENTRY PRINCIPLES FOR CASH DISCOUNT (cont’d) Debtor - Ahmad Jan 19 Sales 3,000 Jan 31 Discount allowed 60 Jan 31 Bank 2,940 3,000 3,000 Discount Allowed a/c Jan 31 Debtor – Ahmad 60 Bank a/c Jan 31 Debtor – Ahmad 2,940