rules of double entry

More on the rules of Double Entry

by Ms S. Ali

It is important we learn the Rules of Double Entry

• An accounts could be an asset, a liability, an expense, or capital

• When an account increases, or decreases we record in the T-account

• The T-account has 2 sides, the debit side, and the credit side

• The Rules of Double Entry tells us which side of the T-account to write on



Multiple Select

If we buy a motor vehicle, what side of the motor vehicle will we write on?

• Debit side

• Credit Side

Multiple Select

If we take a loan from RBC bank, which side of the loan account should we write on?

• Debit side

• Credit Side

Multiple Select

When the owner starts business, what side of the capital account will we write on?

• Debit side

• Credit side

Multiple Select

When we pay electricity bill, which side will we write on in the electricity expense account?

• Debit side

• Credit Side

Lets apply the Rules of Double Entry to transactions

Remember that the double entry rules means that we MUST make two entries for each transaction

This means that for every transaction, there is a "double impact" - or two main accounts being affected

Therefore, for every transaction, there should be a DEBIT entry, and an equal and corresponding CREDIT entry.

Purchase of a motor vehicle by cash

• Two main accounts will be affected here:

• We are buying a motor vehicle

•  We are paying with cas
  

Purchase of a motor vehicle by cash - (continued)

Motor Vehicle is an ASSET, and we are INCREASING the value - so we will DEBIT Motor Vehicle Account

Cash is an ASSET, and we are using CASH to PAY for the new car, so the value of cash is DECREASING - so we will CREDIT the Cash Account.

Started business with money in the bank

Two main accounts are affected:

1) Started business means Capital Account

2) The business now has money in the Bank

This means that :

• The amount of money in the bank INCREASED (as the business had no money in the bank before this transaction - in fact, the business did not even exist) so we will DEBIT the Bank account as this is an asset account.
• Capital account is INCREASING, so we will CREDIT the Capital account.

Purchased Furniture on credit

Two main accounts affected here are:

1) Furniture

2) PURCHASED ON CREDIT means ACCOUNTS PAYABLE

When we use the Rules of Double Entry, we will:

1) Furniture is ASSET, it is an INCREASING, so we will DEBIT the Furniture account

2) Accounts Payable is a LIABILITY, it is INCREASING so we will CREDIT the Accounts Payable Account.

LET US PRACTISE!!

Please try - and do not give up. It takes us alot of time, and practise to get this right.

Multiple Choice

Sold office machinery for cash

• Debit Cash/Credit Office Machinery

• Debit Office Machinery/Credit Cash

Multiple Choice

Took $500 out of the bank and put it into the cash till.

• Debit Cash/Credit Bank

• Debit Bank/Credit Cash

Multiple Choice

Paid the amount owing to Planers Ltd $7500 by cheque

• Debit Bank/Credit Planers Ltd.

• Debit Planers Ltd/ Credit Bank

Multiple Choice

Bought motor van paying by cheque $6000

• Debit Motor Van/Credit Bank

• Debit Bank/ Credit Motor Van

Multiple Choice

Bought machinery $7500 on credit for Planer Ltd.

• Debit Planer Ltd./ Credit Machinery

• Debit Machinery/ Credit Planer

Multiple Choice

Bought office furniture by cheque $1500

• Credit Bank / Debit Office Furniture

• Debit Office Furniture/Credit Bank

Multiple Select

Paid for motor expenses by cash

• Debit: motor expenses

  Credit:cash

• Debit:bank

  Credit: motor expenses

• Debit: motor expenses

  Credit: bank

Multiple Select

Write the effect of:

Received a loan from W wood by cheque..........

• Bank: increase

  Loan: increase

• Bank: increase

  Loan: decrease

• Bank: decrease

  Loan: decrease

Multiple Choice

Received $600 cash from J. Walker

• Debit Cash / Credit J. Walker

• Debit J. Walker/Credit Cash

Multiple Choice

Put 14000 cash into the bank.

• Debit Cash/Credit Bank

• Debit Bank/Credit Cash

This is the end of today's lesson

Please ensure that you have completed the questions and have followed all guidelines.