Double Entry System

⚫ ACCOUNTING is actually based on dual

effects of transactions. For every
transaction, at least two or more account
titles shall be affected.

⚫ TRANSACTIONS are events that will

affect the elements of financial statement.
Business Transactions

Activities Elements

Value received
BUSINESS
TRANSACTIONS
Value parted with

9/8/2020 2
Transactions
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and the Accounting Equation

Here

The accounting equation must remain in

balance after each transaction.

Assets = Liabilities + Equity

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Transaction Analysis
Here

The owner of Scott Company contributed

$20,000 cash to start the business.

The accounts involved are:

(1) Cash (asset)
(2) Owner’s Equity (equity)
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Transaction Analysis
Here

(1) Owners of Scott Company contributed

$20,000 cash to start the business.
Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000

$ 20,000 $ - $ - $ - $ - $ 20,000

$ 20,000 = $ 20,000
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Transaction Analysis
Here

Purchased supplies paying $1,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Supplies (asset)
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Transaction Analysis
Here

(2) Purchased supplies paying $1,000 cash.

Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000

$ 19,000 $ 1,000 $ - $ - $ - $ 20,000

$ 20,000 = $ 20,000
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Transaction Analysis
Here

Purchased equipment for $15,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Equipment (asset)
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Transaction Analysis
Here

(3) Purchased equipment for $15,000 cash.

Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000
(3) (15,000) $ 15,000

$ 4,000 $ 1,000 $ 15,000 $ - $ - $ 20,000

$ 20,000 = $ 20,000
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Transaction Analysis
Here

Purchased supplies of $200 and

equipment of $1,000 on account.

The accounts involved are:

(1) Supplies (asset)
(2) Equipment (asset)
(3) Accounts Payable (liability)
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Transaction Analysis
Here

(4) Purchased supplies of $200 and

equipment of $1,000 on account.
Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
(1) $ 20,000 $ 20,000
(2) (1,000) $ 1,000
(3) (15,000) $ 15,000
(4) 200 1,000 $ 1,200
$ 4,000 $ 1,200 $ 16,000 $ 1,200 $ - $ 20,000

$ 21,200 = $ 21,200
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Transaction Analysis
Here

Rendered consulting services receiving

$3,000 cash.

The accounts involved are:

(1) Cash (asset)
(2) Revenues (equity)
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Transaction Analysis
Here

(5) Rendered consulting services receiving

$3,000 cash.
Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
Bal. $ 4,000 $ 1,200 $ 16,000 $ 1,200 $ 20,000
(5) 3,000 3,000

$ 7,000 $ 1,200 $ 16,000 $ 1,200 $ - $ 23,000

$ 24,200 = $ 24,200
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Transaction Analysis
Here

Paid salaries to employees, $800 cash.

The accounts involved are:

(1) Cash (asset)
(2) Salaries expense (equity)
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Transaction Analysis
Here

(6) Paid salaries to employees, $800 cash.

Assets = Liabilities + Equity
Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
Bal. $ 4,000 $ 1,200 $ 16,000 $ 1,200 $ 20,000
(5) 3,000 3,000
(6) (800) (800)

$ 6,200 $ 1,200 $ 16,000 $ 1,200 $ - $ 22,200

$ 23,400 = $ 23,400
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Transaction Analysis
Here

Borrowed $4,000 from bank.

The accounts involved are:

(1) Cash (asset)
(2) Notes payable (liability)
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Transaction Analysis
Here

(7) Borrowed $4,000 from bank.

Assets = Liabilities + Equity

Accounts Notes Owner's
Cash Supplies Equipment Payable Payable Capital
Bal. $ 4,000 $ 1,200 $ 16,000 $ 1,200 $ 20,000
(5) 3,000 3,000
(6) (800) (800)
(7) 4,000 $ 4,000
$ 10,200 $ 1,200 $ 16,000 $ 1,200 $ 4,000 $ 22,200

$ 27,400 = $ 27,400