Chapter 3

CHAPTER 3 :DOUBLE ENTRY
PRINCIPLES AND BALANCING

OFF
PN. AZURA IBRAHIM
DOUBLE ENTRY CONCEPT
● The double-entry is the basis of an accounting recording
system.
● An in-depth understanding of this system is needed in
order to maintain a correct organized and accurate
bookkeeping records.
● According to double-entry system, each transaction must
be recorded in at least two ledger accounts, with a debit to
one or more and a credit to one or more ledgers.
ACCOUNTING EQUATION &
DOUBLE-ENTRY SYSTEM
Accounting ASSETS = LIABILITIES + OWNER’S EQUITY

Equation
Double-entry Debit for increase Credit for increase

System Credit for decrease Debit for decrease
DOUBLE-ENTRY SYSTEM
Assets/Expenses/Drawings Account
RM RM
Balance b/d XX
Increase in value XX Decrease in value XX
(+) (-)
DOUBLE-ENTRY SYSTEM
Liabilities/Capital/Revenues Account
RM RM
Balance b/d XX
Decrease in value XX Increase in value XX
(-) (+)
DOUBLE-ENTRY SYSTEM
Normal Balance
Account type
Debit Credit
Assets √
Expenses √
Drawings √
Liabilities √
Capital √
Revenue √
DOUBLE ENTRY CONCEPTS
Functions of Assets accounts:

● Assets are resources or properties used to help operate a
business
● Assets are divided into 2 main categories:
1. Non-current assets
2. Current assets
• Assets accounts have a debit balance
Functions of Liabilities accounts:

● Liabilities are debts owed by a business entity to external
parties.
● Liabilities are divided into 2 main categories:
1. Non-current liabilities
2. Current liabilities
• Liabilities accounts have a credit balance
Functions of Owner’s equity (Capital) accounts:
● The business owner will invest a certain amount of money or
assets into the business as initial capital.
● The total amount of cash or assets initially invested belongs
to the business owner.
● Owner’s equity is the business’ debt to the owner based on
the amount invested.
● The total amount of owner’s equity will be determined by the
capital, drawings and business performance (profit or loss)
● Owner’s equity accounts have a credit balance
Functions of Revenues accounts:

● Revenues are income earned from business activities
through the selling of goods or services.
● E.g.: sale of goods, commission received, interest
received or rent received.
● The receipt of revenues will increase the profit and capital
of a business.
● A revenue accounts will have a credit balance
Dr Cash/Bank
Cr Revenues
Functions of Expenses accounts:
● Expenses are money that are paid or will be paid to operate a business.
● Expenses are divided into 2 categories:
1. Purchase expenses – expenses occurred during purchase of goods
(carriage inwards, purchase duty)
2. Operating expenses – expenditure for normal business activities
(rent, salaries, insurance)
• Expenses will reduced the profit and capital of a business
• Expenses accounts will have a debit balance
Dr Expenses
Cr Cash/Bank
Recording Transaction Using T-Accounts
Example 1:
Jan 1 Bought computer worth RM2,500 by cheque.
Journal entries:
Jan 1 Dr Computer Accounts RM2,500
Cr Bank Accounts RM2,500
Computer Accounts
Date Particulars RM Date Particular RM

Jan-01 Bank 2,500
DEBIT
Bank Accounts
Jan-01 Computer 2,500
CREDIT
Recording Transaction Using T-Accounts
Example 2:
Jan 2 Bought office equipment worth RM1,000 on credit
from Jati Enterprise
Journal entries:
Jan 2 Dr Office Equipment Accounts RM1,000
Cr Bank Accounts RM1,000
Office Equipment Accounts
Jan 02 Acc. Payabble - 1,000
Jati Enterprise
DEBIT
Accounts Payable - Jati Enterprise

Jan 02 Office Equipment 2,500
CREDIT
Trade discount & Cash discount
Trade Discount Cash Discount

● An allowance given by
● An allowance given by the seller to the buyer to
the seller to the buyer to encourage the buyer to
encourage the buyer to make prompt payment.
buy in bulk.
● Two types of cash
● Trade discount will be discount , discount
deducted direct from the allowed and discount
total selling price and will received.
not be recorded in the
books of accounts. ● Both will be recorded in
statement of
comprehensive income.
EXERCISES
Transaction 1 Transaction 2 Transaction 3 Transaction 4
The owner
brounght in cash Paid cash for Deposit cash into Purchase goods on
and and motor purchase of office bank account credit from G-Mart
vehicles into the equipment. Trading
business
EXERCISES
Paid motor Nasir returned

Sold goods on expenses by cash
Cash Sales defective goods to
credit to Nasir
the business
EXERCISES
Paid shop The owner The owner

Nasir settled his withdrew cash for
assistant’s salary withdrew goods for
account by cheque his personal use
by cheque his personal use
THANK
YOU…

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CHAPTER 3 :DOUBLE ENTRY

PRINCIPLES AND BALANCING

Accounting ASSETS = LIABILITIES + OWNER’S EQUITY

Double-entry Debit for increase Credit for increase

Functions of Assets accounts:

Functions of Liabilities accounts:

Functions of Revenues accounts:

Date Particulars RM Date Particular RM

Date Particulars RM Date Particular RM

Jan-01 Computer 2,500

Jan 02 Acc. Payabble - 1,000

Accounts Payable - Jati Enterprise

Trade Discount Cash Discount

Transaction 1 Transaction 2 Transaction 3 Transaction 4

Transaction 5 Transaction 6 Transaction 7 Transaction 8

Paid motor Nasir returned

Transaction 9 Transaction 10 Transaction 11 Transaction 8

Paid shop The owner The owner

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