Chapter 4 Chapter 4 The Simple LedgerThe Simple Ledger

Quiz for this chapter will be on Friday Quiz for this chapter will be on Friday October 3 October 3

The Rule of Debit and Credit

Increases are shown on the same side as normal beginning balance of the account appears in the equationDecreases are shown on the opposite side

A = L + OE AssetsAssets Liabilities Liabilities Owner’s EquityOwner’s Equity

Debit Debit DebitDebit DebitDebit

CreditCredit CreditCredit CreditCredit

Every transaction in business is recorded both as a debit in one (or more) accounts and as a credit in one (or more) accounts. Under this system, the total of the debit entries equals the total of the credit entries

Double Entry System of Accounting

TAS will help you to analyze a transaction accurately.

Step 1: Write down (in column A) the names of accounts which are affected by the transaction.

Step 2: Write down (in column B) whether each of these accounts is an asset, a liability, or the owners equity account.

Step 3: Write down (in column C) whether the accounts are to be increased or decreased.

Transaction Analysis Sheet

TAS will help you to analyze a transaction accurately.

Step 4: Write down (in column D) whether the accounts are to be debited or credited.

Step 5 : Write the amounts (in column E) by which the accounts are increased or decreased.

Transaction Analysis Sheet

After step 5, you can now make an accounting entry. Accounting Entry is when you record all the changes in the accounts which is caused by a business transaction. Let’s do transaction #2 to #7 (Page 96 to 100) on the worksheet, I provided.

Transaction Analysis Sheet

Transaction 1: The company purchases $200 worth of supplies from Packaham Products to be paid later.Transaction 2: The company paid $500 to Dini Bro in partial payment of the amount owed to them. Transaction 3: The company receives $200 cash from R Van Loon in partical payment of her debt. Transaction 4: A delievery service is provided for a customer at a price of $400 The customer pays cash at the time of the service is completed.

Transactions in Page 94 – 100

Transaction 5• A used truck costing $8000 is purchased from Dini

Bros. A cash down payment of $2500 is made at the purchase and the balance is to be paid at a later date.

Transaction 6: A delievery service is completed for R. Van at a price

of $350. Van Loon does not pay for the service at the time it is provided, but agrees to pay within 30 days.

Transaction 7: One of the lifting machines (part of Equipment) breaks

down. The company spends $650 cash to have the machine repaired.

Transactions in Page 94 - 100

Page 102 Review #1, 3, 4, 5, 6, 7, 12Page 102-105 Exercises #1 and #2

Classwork / Homework