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    Accounting 002

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    Win Lwin Oo
    The Italian mathematician Luca Pacioli formulated the basic accounting equation in 1494, which all modern accounting systems are based on. The equation states that assets are equal to liabilities plus owner's equity. Non-current assets are long-term assets used in operations for many years, while current assets can be converted to cash within a year. Liabilities are also divided into non-current, which are paid back over multiple years, and current, which must be paid within a year. Owner's equity represents the capital invested by owners.

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    Accounting 002

    Uploaded by

    Win Lwin Oo
    11 views20 pages
    The Italian mathematician Luca Pacioli formulated the basic accounting equation in 1494, which all modern accounting systems are based on. The equation states that assets are equal to liabilities plus owner's equity. Non-current assets are long-term assets used in operations for many years, while current assets can be converted to cash within a year. Liabilities are also divided into non-current, which are paid back over multiple years, and current, which must be paid within a year. Owner's equity represents the capital invested by owners.

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    The Italian mathematician Luca Pacioli formulated the basic accounting equation in 1494, which all modern accounting systems are based on. The equation states that assets are equal to liabilities plus owner's equity. Non-current assets are long-term assets used in operations for many years, while current assets can be converted to cash within a year. Liabilities are also divided into non-current, which are paid back over multiple years, and current, which must be paid within a year. Owner's equity represents the capital invested by owners.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    11 views20 pages

    Accounting 002

    Uploaded by

    Win Lwin Oo
    The Italian mathematician Luca Pacioli formulated the basic accounting equation in 1494, which all modern accounting systems are based on. The equation states that assets are equal to liabilities plus owner's equity. Non-current assets are long-term assets used in operations for many years, while current assets can be converted to cash within a year. Liabilities are also divided into non-current, which are paid back over multiple years, and current, which must be paid within a year. Owner's equity represents the capital invested by owners.

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    HISTORY OF ACCOUNTING

     The Italian mathematician Luca Pacioli formulated a


    basic accounting equation formula in 1494 in his work “A
    Treatise on Accounts and Records.” Accounting systems of
    all countries are based on the use of this basic accounting
    equation.
    =

    If owner’s contributions do not efficient,

    Assets = Owner’s Equity + outsider’s money

    Owner’s
    Assets = + Liabilities
    Equity
    NON CURRENT ASSETS & CURRENT ASSETS
    Non-Current Assets (Long-term)
    They are assets acquired not for resale but to use
    in the operation of the business. They usually bring
    benefits to the business for a numbers of years.

    Current Assets (Short-term)


    They are assets in the form of cash or assets that
    can be converted into cash in the ordinary course of
    the business in the near future.
    TWO TYPES OF ASSETS
    Non-Current assets
    Land, Premises,
    Motor Vehicles,
    Fixtures and fittings,
    Office Equipment,
    Machinery, Trade Mark,
    Patents right, Goodwill etc.

    Current Assets
    Cash in hand,
    cash at bank,
    Closing stocks for resale,
    Debtors or account
    Receivable.
    TWO TYPES OF LIABILITIES
    Non-current Liabilities ( Long-Term)
    These are liabilities for which the business has
    more than one accounting year to repay.
    Examples are long-term bank loans, mortgage
    loans, bonds, etc.

    Current Liabilities (Short-term)


    These are liabilities that have to be settled within
    one accounting year.
    Examples include trade creditors or trade payable
    and short-term loans, bank overdraft.
    CAPITAL OR OWNER’S EQUITY

    ❖ Capital is the amount invested in the business by


    the owners or shareholders.

    ❖ From accounting point of view, the capital


    invested by the owner is regarded as a liability of
    the business.
    Journals
    Ledger Format
    Title

    Motor Van A/c L-1


    Date Particular Fol Amount Date Particular Fol Amount
    io

    To Received By Payment
    Increase Decrease

    Debit Side Credit Side


    Bought a motor van for business with MMK 20,000,000 with cash.
    Motor van A/C L-1
    Folio Fol
    Date Particular MMK Date Particular MMK
    (000)
    2020J To Cash A/c CB 20,000,000 By
    1
    an 1

    Cash Book(Cash A/c) CB 1


    Folio Fol
    Date Particular MMK Date Particular MMK

    To 2020 By Motor van A/c L1 20,000,000


    Jan 1
    Paid the insurance for employees MMK 1,000,000 by cheque.
    Insurance A/c
    L-2
    Folio Fol
    Date Particular Amount Date Particular Amount
    (000)
    2020 To Bank A/c CB 1000 By
    1
    Jan
    3

    Cash Book(Bank A/c) CB 1


    Folio Fol
    Date Particular Amount Date Particular Amount
    (000)
    To 2020 By Insurance A/c L2 1000
    Jan3
    Illustration of double entry system asset, liability, capital, expense and revenue
    Transactions Effect Action

    2012 May 1 Started a household • Increase asset of bank • Debit Bank A/C
    machines business putting MMK • Increase capital of owner • Credit Capital A/C
    25,000 into a business bank
    account.
    2012 May 3 Bought equipment • Increase asset of • Debit Equipment A/C
    on credit from House Supplies equipment. • Credit House Supplies
    MMK 12,000. • Increase liability to A/C
    House supplies

    2012 May 4 Withdrew MMK 150 • Increase asset of cash • Debit Cash A/C
    cash from the bank and placed it • Decrease asset of bank • Credit Bank A/C
    in the cash box.

    2012 May 7 Bought a Van paying • Increase asset of Van • Debit Van A/C
    by cheque MMK 6,800. • Decrease asset of Bank • Credit Bank A/C

    2012 May 10 Sold some • Increase asset of money • Debit J. Rose A/C
    equipment that was not needed at owing from J.Rose. • Credit Equipment A/C
    cost of MMK 1,100 on credit to J. • Decrease asset of
    Rose. equipment.

    2012 May 21 Returned some of • Decrease liability to • Debit House Supplies


    the equipment costing MMK Housing Supplier A/C
    2,300 to House Supplies. • Decrease asset of • Credit Equipment A/C
    equipment
    2012 May 28 J. Rose pays the • Increase asset of bank • Debit Bank A/C
    amount owing MMK 1,100 by • Decrease asset of money • Credit J.Rose A/C
    cheque. owing by J. Rose.

    2012 May 30 Bought another van • Increase asset of van • Debit Van A/C
    paying by cheque MMK 4.300. • Decreases asset of bank • Credit Bank A/C

    2012 May 31 Paid MMK 9,700 to • Decreases liability to • Debit House Supplies
    House Supplies by cheque. House Supplies A/C
    • Decreases asset of bank • Credit Bank A/C
    Purchase A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    To ****** By

    Sale A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    To By *******
    Purchase Return A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    To By *******

    Sale Return A/C


    Folio Fol
    Date Particular Amount Date Particular Amount

    To ******* By
    Drawing A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    Cash A/c ****** By


    Motor van A/c ******
    Purchase A/c ******

    Cash A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    To Drawing A/c *******


    Motor Van A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    Drawing A/c ******

    Purchase A/C
    Folio Fol
    Date Particular Amount Date Particular Amount

    To Drawing A/c *******


    Golden Rules for Debit and Credit

    Accounts To record Entry in the Accounts

    Assets an increase Debit

    a decrease Credit

    Expenses an increase Debit

    a decrease Credit

    Liability an increase Credit

    a decrease Debit

    Capital an increase Credit

    a decrease Debit

    Revenue an increase Credit

    a decrease Debit

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