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Contents:
Accounts Format of accounts Chart of accounts
Double entry bookkeeping
3.1.1 Introduction to accounts
Business transactions are recorded through accounts. Accounting item is a specific item of six accounting elements
Based on the two equations, other rules are: (1) Every category of accounts has its nature. Assets, expenses are of debit nature. Liabilities, owner’s equity, revenue are of credit nature. (2) Increases to accounts are recorded on the same side as the nature of the account. And decreases are recorded on the opposite side to the nature of the account.
3.1 Accounts源自3.1.2 Format of accounts
example Accounts receivable account is an asset item. Increase in this account is debited, and decrease is credited. At the beginning of January, there’re ¥2,000 balance remained, and following are the changes occur in this account during this month. 10 Jan., increase ¥10,000(Sales on credit).
S t e p s t o f o l l o w t o record transactions with double entry bookkeeping system
Step 1: Determine which two or more accounts will be affected by the transaction; Step 2: For each of the accounts you identify in Step 1, you must determine whether it is an asset, liability, expense or income and so determine their natures; Step 3: For each of the accounts you identify in Step 1, you must judge whether the account increases or decreases and determine whether to debit them or credit them.
3.2 Double Entry Bookkeeping
3.2.2 Rules for double entry bookkeeping
Two equations to be based on: Total Debits = Total Credits
Assets = Liabilities + Owner's Equity
3.2.1 Introduction to double entry bookkeeping
Content: Each business transaction affects at least two accounts. when there’s one account debited, and there will be another accounts equally credited.
12 Jan., increase ¥15,000(Sales on credit).
15 Jan., decrease ¥20,000(customer pay off). 20 Jan., increase ¥5,000(Sales on credit).
At the end of this month, we have a debit balance of ¥5000. The balance will be carried to the next accounting period.
Part 2 Double Entry System
Task 3 Double Entry System
Mini Case:
Mr. Bush set up a business called Bush’s Consultancy Services on 1 January. During the first month, transactions occurred as the following: (1) Investment cash in the business, $50,000; (2) Bought office furniture for cash, $8,000; (3) Bought office supplies on account, $2,000; (4) Received cash from clients for services, $5,000; (5) Paid staff salary with cash, $8,000; (6) Earned professional fees on account, $10,000; (7) Paid cash on account for office supplies, $2,000; (8) Withdraw cash for personal use, $5,000. If you are the accountant of the business, how to start with accounting, how to record these transactions?
