4.3 the rules for assets, liabilities and owner's equity
TRANSCRIPT
4.3THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
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© Michael Allison. Author’s permission required for external use.
So how do you know which entries are DEBITS and which entries are CREDITS?
How do we know to make a DEBIT in Wages and a CREDIT in Cash at Bank?
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Wages [E]31/12 Cash at Bank 500
DEBIT
Cash at Bank [A]31/12 Wages 500
CREDIT
© Michael Allison. Author’s permission required for external use.
There are rules for double-entry that must always be followed – whether you make a DEBIT or a CREDIT entry will depend on two factors:
1. The type or classifi cation of the account aff ected. Is it a:
Asset?
Liability?
Owner’s Equity?
Revenue?
Expense?
2. Whether the account in question is increasing or decreasing in value
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
© Michael Allison. Author’s permission required for external use.
The rules for:
Assets
Liabilities
Owner’s Equity…
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE 25000
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Capital [OE[
Date Details $ Date Details $
Cash at Bank [A]
Date Details $ Date Details $
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE 25000
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000
Capital [OE[
Date Details $ Date Details $
1 Jan Cash at Bank 25000
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE 25000
Transaction Account Classification Increase / Decrease
Debit Credit
1. The owner contributed $25,000 to commence the business
Cash A 25000
Capital OE 25000
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L 10000
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000
2 Jan Loan 10000
Loan [L]
Date Details $ Date Details $
2 Jan Cash at Bank 10000
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000
2 Jan Loan 10000
Loan [L]
Date Details $ Date Details $
2 Jan Cash at Bank 10000
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L 10000
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L 10000
Transaction Account Classification Increase / Decrease
Debit Credit
2. The business took out a loan for $10,000
Cash A 10000
Loan L 10000
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A 3300
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 3 Jan Computer/GST Liability 3300
1 Jan Loan 10000
Computer [A]
Date Details $ Date Details $
3 Jan Cash at Bank 3000
GST Liability [L]
Date Details $ Date Details $
3 Jan Cash at Bank 300
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A 3300
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 3 Jan Computer/GST Liability 3300
1 Jan Loan 10000
Computer [A]
Date Details $ Date Details $
3 Jan Cash at Bank 3000
GST Liability [L]
Date Details $ Date Details $
3 Jan Cash at Bank 300
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A 3300
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A 3300
Transaction Account Classification Increase / Decrease
Debit Credit
3. Purchased a computer for cash for $3,000 plus $300 GST
Computer
A 3000
GST Liability
L 300
Cash A 3300
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L 500
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L 500
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L 500
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L 500
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $1,000
Loan L 500
Cash A 500
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
Loan [L]
Date Details $ Date Details $
4 Jan Cash at Bank 500 1 Jan Cash at Bank 10000
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $500
Loan L 500
Cash A 500
Loan [L]
Date Details $ Date Details $
4 Jan Cash at Bank 500 1 Jan Cash at Bank 10000
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $500
Loan L 500
Cash A 500
Transaction Account Classification Increase / Decrease
Debit Credit
4. Made a loan repayment of $500
Loan L 500
Cash A 500
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A 660
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
5 Jan Stock/GST Liability 660
Stock [A]
Date Details $ Date Details $
5 Jan Cash at Bank 600
GST Liability [L]
Date Details $ Date Details $
3 Jan Cash at Bank 300
5 Jan Cash at Bank 60
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
5 Jan Stock/GST Liability 660
Stock [A]
Date Details $ Date Details $
5 Jan Cash at Bank 600
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A 660
GST Liability [L]
Date Details $ Date Details $
3 Jan Cash at Bank 300
5 Jan Cash at Bank 60
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A 660
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A 660
Transaction Account Classification Increase / Decrease
Debit Credit
5. Bought stock for $600 cash plus GST of $60
Stock A 600
GST Liability
L 60
Cash A 660
© Michael Allison. Author’s permission required for external use.
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE 800
Debit Credit
Assets
Liabilities
Owner’s Equity
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
Debit Credit
Assets
Liabilities
Owner’s Equity
© Michael Allison. Author’s permission required for external use.
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
6 Jan Capital 800 5 Jan Stock/GST Liability 660
Capital [OE[
Date Details $ Date Details $
1 Jan Cash at Bank 25000
6 Jan Cash at Bank 800
Cash at Bank [A]
Date Details $ Date Details $
1 Jan Capital 25000 1 Jan Computer/GST Liability 3300
1 Jan Loan 10000 4 Jan Loan 500
6 Jan Capital 800 5 Jan Stock/GST Liability 660
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE 800
Capital [OE[
Date Details $ Date Details $
1 Jan Cash at Bank 25000
6 Jan Cash at Bank 800
4.3 - THE RULES FOR ASSETS, LIABILITIES AND OWNER'S EQUITY
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE 800
Transaction Account Classification Increase / Decrease
Debit Credit
6. The owner contributed $800 to the business
Cash A 800
Capital OE 800
© Michael Allison. Author’s permission required for external use.
TASK
In-class Homework
SQ5 X