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Accounting

Published Jul 28, 2014 in Education
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Presentation Slides & Transcript

Presentation Slides & Transcript

THE DOUBLE ENTRY FRAMEWORK

Debit +Credit -Debit means +Credit means -“+ & -” Accounts

“T” AccountsDebitCreditDebit means LeftCredit meansRight

“T” AccountsDr.Cr.Abbreviation for DebitAbbreviation for Credit

Dr.Cr.ACCOUNT NAMECASH

An Increase Side, andA Decrease SideBut, Some Accounts Increase on the Debit SideAnd, Some Accounts Increase on the Credit SideEffects on Dr AND Cr Account has:

7 RULES OF DEBITS AND CREDITS

ASSET ACCOUNTSDr.Cr.+Increase on Debit SideDecrease on Credit SideRULE #1

PURCHASED OFFICE SUPPLIES FOR Rs 800 CASHEXAMPLE:

Name the accounts affected:CASHOFFICE SUPPLIESSTEP #1

Determine Classification of AccountsCASHASSETOFFICESUPPLIESASSETSTEP #2

Now that we know the classification, we can identify increase and decrease sides.CASHDR.CR. +OFFICE SUPPLIESDR.CR. +STEP #3

Did Office Supplies Increase or Decreasein this transaction?PURCHASED OFFICE SUPPLIES FOR Rs800 CASH

INCREASEDOFFICE SUPPLIESDR.CR.Rs 800+

What about Cash? Increase or Decreasein this transaction?PURCHASED OFFICE SUPPLIES FOR Rs 800 CASH

DECREASEDCASHDR.CR.$800+

IN EVERY TRANSACTION DEBITS MUST EQUAL CREDITSRULE #2

DEBITS = CREDITSDR.CASH+Rs 800CR.OFFICE SUPPLIESDR.CR.Rs 800+

LIABILITY ACCOUNTSDr.Cr.+Decrease onDebit SideIncrease on Credit SideRULE #3

PURCHASED EQUIPMENT From Ram FOR Rs 3,0000EXAMPLE:

Name the accounts affected:EQUIPMENTRAMSTEP #1

EQUIPMENTRAMASSETLIABILITYDetermine Classification of Accounts:STEP #2

EQUIPMENTDR.CR. +ACCOUNTS PAYABLEDR.CR.+Now that we know the classification, we can identify increase and decrease sides.STEP #3

Did Equipment Increase or Decrease in this transaction?PURCHASED EQUIPMENT ON ACCOUNT FOR $3,000.

INCREASEDEQUIPMENTDR.CR.Rs 3000+

Ram? Increase or Decreasein this transaction?PURCHASED EQUIPMENT ON ACCOUNT FOR Rs 3,000.

INCREASEDRAMDR.CR.Rs 3000+

DEBITS = CREDITSDR.RAM+Rs 3000CR.EQUIPMENTDR.CR. Rs 3000+

CAPITAL ACCOUNTDr.Cr.+Decrease onDebit SideIncrease onCredit SideJUST LIKE LIABILITY ACCOUNTSRULE #4

AVINASH THE OWNER, INVESTED Rs 25,000 IN THE BUSINESSEXAMPLE:

Name and classify the accounts affected:CAPITALCASHDR.CR.DR.CR.CAPITALASSETSTEP #1& 2

Now that we know the classification, we can identify increase and decrease sides.CASHDR.CR. +CAPITALDR.CR. +STEP #3

CASHDR.CR. +CAPITALDR.CR.+INCREASEDINCREASED Rs 25,000Rs 25,000INCREASED OR DECREASED?

DR.CAPITAL+Rs 25,000CR.CASHDR.CR.+Rs 25,000DEBITS = CREDITS

DRAWING ACCOUNTDr.Cr.+Increase on theDebit SideDecrease on theCredit SideJUST LIKEASSET ACCOUNTSRULE #5

AVINASH WITHDREW Rs 1,500 FOR PERSONAL EXPENSESEXAMPLE:

Name and classify the accounts affected: DRAWINGCASHDR.CR.DR.CR.CAPITALASSETSTEP #1& 2

Now that we know the classification, we can identify increase and decrease sides.CASHDR.CR. + DRAWINGDR.CR.+STEP #3

CASHDR.CR.+ DRAWINGDR.CR.INCREASEDDECREASEDRs 1,500Rs 1,500+INCREASED OR DECREASED?

DR.DRAWINGRs 1,500CR.CASHDR.CR.Rs 1,500++DEBITS = CREDITS

REVENUE ACCOUNTSDr.Cr.Decrease onDebit SideIncrease onCredit SideJUST LIKE LIABILITY & CAPITAL ACCOUNTS+RULE #6

MARY PERFORMED SERVICES AND RECEIVED Rs 4,500 IN CASHEXAMPLE:

Name and classify the accounts affected:CONSULTING FEESCASHDR.CR.DR.CR.REVENUEASSETSTEP #1& 2

Now that we know the classification, we can identify increase and decrease sides.CASHDR.CR.CONSULTING FEESDR.CR.++STEP #3

CASHDR.CR.CONSULTING FEESDR.CR.INCREASEDINCREASEDRs 4,500Rs 4,500++INCREASED OR DECREASED?

DR.CONSULTING FEESRs 4,500CR.CASHDR.CR.Rs 4,500++DEBITS = CREDITS

MARY PERFORMED Rs 6,000 OF SERVICES ON ACCOUNTEXAMPLE:

DEBITS = CREDITSDR.CONSULT. FEESRs 6,000CR.ACCOUNTS RECEIVABLEDR.CR.Rs 6,000ACCOUNTS RECEIVABLEINSTEAD OF CASH++

EXPENSE ACCOUNTSDr.Cr.Increase on theDebit SideDecrease on theCredit SideJUST LIKEASSET ACCOUNTS+RULE #7

RAM PAID HER ASSISTANT Rs750 IN WAGESEXAMPLE:

Name and classify the accounts affected:WAGES EXPENSECASHDR.CR.DR.CR.EXPENSEASSETSTEP #1& 2

Now that we know the classification, we can identify increase and decrease sides.CASHDR.CR.WAGES EXPENSEDR.CR.++STEP #3

CASHDR.CR.WAGES EXPENSE DR.CR.INCREASEDDECREASEDRs 750Rs 750++INCREASED OR DECREASED?

DR.CASHRs750CR.WAGES EXPENSEDR.CR.Rs750++DEBITS = CREDITS

CASH2,000 500 570 4303,500FOOTING111,2003002005050802003006501503,130FOOTINGSTEP #1FOOT DEBIT& CREDITSIDES To “Foot” meansto TotalBALANCING A Dr & Cr ACCOUNT

STEP #2: Find balance by finding the difference between the debit and credit totals. Rs 3,500 debit footing– Rs 3,130 credit footingRs 370 balanceBALANCING A Dr & Cr ACCOUNT

CASH2,000 500 570 4303,500111,2003002005050802003006501503,130370BALANCEBalance iswritten on side with larger totalBALANCING A Dr & Cr ACCOUNT

List of all accountsIncluding their balancesTotaling debits and creditsProving debits equal creditsUsed as an aid in preparing financial statementsTRIAL BALANCE

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceHEADING should include:Name of the CompanyTitle of Document “Trial Balance”Date of the Trial Balance

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery Equipment370 00650 00200 003600 0080 00All Asset accountslisted first

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts Payable370 00650 00200 003600 001800 0080 00Liabilities areshown next

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts Payable CapitalDrawing370 00650 00200 003600 001800 002000 0080 00150 00Now the capital Accounts

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts Payable Capital DrawingDelivery Fees370 00650 00200 003600 001800 002000 0080 00150 002150 00Then the Revenue Account

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts PayableCapital DrawingDelivery FeesWages ExpenseRent ExpenseTelephone Expense370 00650 00200 003600 001800 002000 0080 00150 002150 00650 00200 0050 00Finally, the Expenses

Trial BalanceJune 30, 20--Account TitleDebit BalanceCredit BalanceCashAccounts ReceivableSuppliesPrepaid InsuranceDelivery EquipmentAccounts Payable Capital DrawingDelivery FeesWages ExpenseRent ExpenseTelephone Expense370 00650 00200 003600 001800 002000 0080 00150 002150 00650 00200 0050 005950 005950 00It Balances!!!Debits = Credits