LESSON 1 THE ACCOUNGTING EQUATION AND TRANSACTIONS THROUGH ‘DOUBLE ENTRY’ Trường ĐH Mở Hà Nội Trung tâm E Learning NỘI DUNG ÔN TẬP MÔN TACN KẾ TOÁN 1 (AC10) PHẦN 1 NỘI DUNG ÔN TẬP 1 Tóm tắt kiến thức mỗi bài 2 Bài tập mẫu PHẦN 2 BÀI TẬP THỰC HÀNH Tài liệu ôn tập Học liệu điện tử đã cung cấp ở lớp học trên LMS Bài giảng trực tuyến V class PHẦN 1 NỘI DUNG ÔN TẬP LESSON 1 THE ACCOUNTING EQUATION AND TRANSACTIONS THROUGH ‘DOUBLE ENTRY’ SUMMARY 1 The accounting equation Assets = Capital + Liabilities.
Trường ĐH Mở Hà Nội Trung tâm E-Learning NỘI DUNG ÔN TẬP MÔN: TACN KẾ TOÁN (AC10) PHẦN 1: NỘI DUNG ƠN TẬP 1.Tóm tắt kiến thức 2.Bài tập mẫu PHẦN 2: BÀI TẬP THỰC HÀNH • Tài liệu ôn tập: - Học liệu điện tử cung cấp lớp học LMS - Bài giảng trực tuyến - V-class PHẦN 1: NỘI DUNG ÔN TẬP LESSON 1: THE ACCOUNTING EQUATION AND TRANSACTIONS THROUGH ‘DOUBLE ENTRY’ SUMMARY The accounting equation Assets = Capital + Liabilities Double-entry rules Assets Capital Liabilities Transaction effect Double-entry rule an increase Debit a decrease Credit an increase Credit a decrease Debit an increase Credit a decrease Debit Important points to remember from this lesson: Book-keeping is the process of recording financial transactions in the books of a business The accounting equation is Assets = Capital + Liabilities Both sides of the accounting equation must always be equal The accounting equation is expressed in the balance sheet, so the balance sheet should always balance, i.e totals of both sides must be the same The double entry system records transactions into a set of accounts show the double effect of every transaction An account is a separate record for each asset, liability and capital The left-hand side of the ‘T’ accounts is called the debit side and the right-hand side is called the credit side There are specific double entry rules for assets, liabilities and capital to show their increases and decreases There must be a debit entry and a corresponding credit entry of the same value (and vice-versa) for every transaction 10 Entries in accounts must show the date, description and the amount for each transaction EXERCISES Exercise 1: Draw up the following table In the right-hand columns you should enter the names of the accounts which are to be debited and credited respectively Transactions A Bought office furniture for cash B Sold goods on credit to T Rich C Bought motor vehicle on credit from L Wolfson & Co D A debtor, R Price, pays the business by cheque E The owner puts a further amount into the business by Debit Credit cheque F Paid by cheque for the motor vehicle bought from L Wolfson & Co Exercise 2: Prepare T-accounts in the books of N Eley to record the following transactions: Year 5: Aug Started business with £6,000 in the bank “ Bought a motor vehicle on credit from Elstead Garage for £2,800 “ 15 Purchased goods by cheque £420 “ 23 Bought office equipment on credit from Logmore & Sons for £370 “ 29 Paid by cheque the amount due to Elstead Garage ANSWERS Exercise 1: Transactions Bought office furniture for cash Debit office Credit Cash B Sold goods on credit to T Rich furniture T Rich Goods C Bought motor vehicle on credit from L Wolfson motor L Wolfson D & Co A debtor, R Price, pays the business by cheque vehicle Bank & Co R Price E The owner puts a further amount into the Bank Capital F business by cheque Paid by cheque for the motor vehicle bought L Wolfson Bank A from L Wolfson & Co Explanations & Co A Transaction effect Increase of asset: office furniture Book-keeping action debit office furniture account B Decrease of asset: cash Increase of asset: debtor T Rich credit Cash account debit T Rich a/c C Decrease of asset: goods Increase of asset: motor vehicle credit Cash a/c debit motor vehicle a/c Increase of liability: creditor L Wolfson & credit L Wolfson & Co a/c D Co Increase of asset: Cash debit cash a/c E Decrease of asset: debtor R Price Increase of asset: Cash at bank credit R Price a/c debit Bank a/c F Increase of Capital credit capital a/c Decrease of liability from L Wolfson & Co debit L Wolfson & Co a/c Decrease of asset: Cash at bank credit Bank a/c Exercise 2: Year Aug Transaction effect Increase of asset: Cash at bank Book-keeping action debit Bank a/c £6,000 Increase of Capital credit capital a/c £6,000 Bank Year Aug £ Capital 6,000 Capital Year Aug Year Aug £ Bank 6,000 Transaction effect Increase of asset: motor vehicle Book-keeping action Dr Bank £2,800 Increase of liability: creditor Elstead Cr Elstead Garage £2,800 Garage Motor vehicle Year Aug £ Elstead Garage 2,800 Elstead Garage Year £ Aug Motor vehicle 2,800 Year Transaction effect Aug 15 Increase of asset: goods Book-keeping action Dr Goods £420 Decrease of asset: Bank Cr Bank £420 Goods Year Aug 15 £ Bank 420 Bank Year Aug 15 Year Transaction effect Aug 23 Increase of asset: office equipment £ Goods 420 Book-keeping action Dr office equipment £370 Increase of Liability: Logmore & Sons Cr Logmore & Sons £370 Office equipment Year Aug 23 £ Logmore & Sons 370 Logmore & Sons Year £ Aug 23 Office equipment 370 Year Transaction effect Aug 29 Decrease of Liability: Elstead Garage Decrease of asset: Bank Book-keeping action Dr Elstead Garage £2,800 Cr Bank £2,800 Elstead Garage Year Aug 29 £ Bank 2,800 Bank Year £ Aug 29 Elstead Garage 2,800 LESSON 2: PURCHASES, SALES AND EXPENSES SUMMARY The purchases account is used to record the purchases of stock while the returns inwards account is used to record goods returned by the business’s customers The sales account is used to record the sales of stock, while the returns outwards account is used to record goods returned to suppliers by the business Only goods bought with the intention of reselling them as a part of trading activities are considered as purchases The purchases of other assets is not considered as purchases Sales referred to the sale of those goods in which the business trades; the sale of goods that were bought with the intention to resell The purchase or sale of goods for cash may involve payment or receipt being made by cash or by cheque (bank) Entries in an expense account will be on the debit side Drawings are money or goods taken out of the business by the owner, drawings are not an expense of the business EXERCISES Exercise 1: Record the following in appropriate accounts, using the rules of double entry Year April L Timms started in business with £5,000 in the bank “ Bought office equipment for £370 by cheque “ Paid rent by cheque £260 “ Purchased goods on credit £420 from A Smart “ 11 Returned goods to A Smart £35 “ 14 Drew from bank for office cash £130 “ 15 Paid wages in cash £115 “ 18 Sold goods on credit to R Squire £175 “ 24 Sold goods for cheque £85 Exercise 2: You are required to enter the following transactions in the books of M O’Ryan: Year Aug Started in business with £7,000 in the bank “ Paid rent by cheque £280 “ Purchased goods on credit £520 from R Lester “ 12 Returned goods to R Lester £45 “ 15 Sold goods on credit to D Langford £265 “ 19 M O’Ryan withdrew from bank for private use £160 “ 22 D Langford returned goods £30 “ 24 Drew from bank for office cash £240 “ 26 Paid R Lester by cheque the amount owing “ 28 Received cheque £100 on account from D Langford “ 30 Paid wages in cash £160 “ 31 Bought office equipment by cheque £215 ANSWERS Exercise 1: * April Transaction effect Book-keeping action Increase of asset: Cash at bank debit Bank a/c £5,000 Increase of Capital credit capital a/c £5,000 Bank Year April £ Capital 5,000 Capital Year £ April * April Bank 5,000 Transaction effect Book-keeping action Increase of asset: office equipment debit office equipment a/c £370 Decrease of asset: Cash at bank credit Bank a/c £370 Office equipment Year April £ Bank 370 Bank Year April * April £ office equipment 370 Transaction effect Book-keeping action Increase of expense: Rent debit Rent a/c £260 Decrease of asset: Cash at bank credit Bank a/c £260 Rent Year April £ Bank 260 Bank Year April * April £ Rent 260 Transaction effect Book-keeping action Increase of asset: Goods for resale debit Purchases a/c £420 Increase of Liabilities: Creditor A Smart credit A Smart a/c £420 Purchases Year April £ A Smart 420 A Smart Year £ April * April 11 Purchases 420 Transaction effect Book-keeping action Decrease of asset: Returns Outwards credit Returns Outwards a/c £35 Decrease of Liabilities: Creditor A Smart debit A Smart a/c £35 Returns Outwards Year £ April 11 A Smart 35 A Smart Year £ April 11 Returns Outwards * April 14 Transaction effect 35 Book-keeping action Decrease of asset: Cash at bank credit Bank a/c £130 Increase of asset: Cash in office debit Cash a/c £130 Bank Year £ April 14 Cash 130 Cash Year £ April 14 Bank 130 * April 15 Transaction effect Book-keeping action Decrease of asset: Cash credit Cash a/c £115 Increase of expense: Wages debit Wages a/c £115 Wages Year April 15 £ Cash 115 Cash 10