define the double-entry system and state the rules for double entry

Define the double-entry system and state the rules for double

entry

Copyright Gayle M. Richardson, CPA, 2000. All Rights reserved.

What is Double Entry??

• When a business event is consummated, it effects at least two accounts.

• In Chapter 1 we saw how this happens with a spread sheet.

• Now we are going to replace increase/decrease with DEBIT/CREDIT

• Debits always equal Credits!!!!!!!!!!


This is a T Account


This is a T

Left side

debitdrplus+positive

Right side

creditcrminus-negative


Assets, Withdrawals & Expensescarry debit balances

and in order to increase them, we debit them…….to decrease them,

we credit them.

•DEBIT


Capital, Liabilities & Revenues carry credit balances

and in order to increase them, we credit them…….to decrease them,

we debit them.

•CREDIT


The normal balance or increase in an account

• Assets

• Withdrawals/Dividends

• Expenses

• Capital/Capital Stock

• Liabilities

• Revenues/Retained Earnings


Proprietorship Corporation

Assets Assets

Liabilities Liabilities

Capital Capital Stock

Retained Earnings

Withdrawals Dividends

Revenues Revenues

Expenses Expenses

Assets carry debit balancesWithdrawals carry debit balancesExpenses carry debit balances

All you have to remember is that you are in AWE over this.

The Capital account carries a credit balanceLiabilities carry credit balancesRevenue accounts carry credit balances

Now isn’t this CLEAR to you??

Is it CLR?


Then, it must be

AWECLR

(instead of all clear)


Normal Bal and Increases

K knowthis


HERE’S AN EXAMPLE

• G.Rogers invests $60,000 in her business

Debit Cash ,60,000

Credit Capital, 60,000

We increased cash and

increased capital!

a)60,000

a)60,000


Summary Slide

• DEBITS = CREDITS

• LEFT SIDE = RIGHT SIDE

• WE ARE ALWAYS IN BALANCE!

• AWE/CLR

define the double-entry system and state the rules for double entry

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