RECORDING

PROCESS AND
THE DOUBLE-
ENTRY SYSTEMS
NUR SHAHIDA AB FATAH

BP12103 PRINCIPLES OF ACCOUNTING

FACULTY OF BUSINESS, ECONOMICS AND ACCOUNTANCY

UNIVERSITI MALAYSIA SABAH

LEARNING OUTCOMES
At the end of this module, students should be able to:

1. Record transactions in accounts using the double-entry system.

2. Record transactions in journals.

3. Post (transfer) the journal entries to the ledgers.

4. Balance off the ledgers.

5. Prepare trial balance

BASIC STEPS IN THE RECORDING PROCESS

STEP 3
STEP 1 Transfer the journal
Analyse each information into the
transaction ledger accounts

STEP 2
Enter each
transaction into the
journal
THE ACCOUNT
The simplest account format: the T-account.
◦ It takes the form of the capital letter ‘T’.
◦ The three parts of the T-account:

◦ It helps you understand the double-entry system.

THE ACCOUNT (cont.)
Rules of debit and credit
◦ Assets, expenses and drawings
◦ Increases are recorded on the left (debit) side
◦ Decreases are recorded on the right (credit) side
◦ Liabilities, capital and revenues
◦ Increases are recorded on the right (credit) side
◦ Decreases are recorded on the left (debit) side
THE ACCOUNT (cont.)
Three-column Account
A widely used format in a manual system that has three
money columns—debit, credit and balance
THE JOURNAL AND JOURNALISING
Transactions are first recorded in a journal (the book of original entry)
following these four steps:
1. Identify the transaction from source documents.
2. Specify the account affected by the transaction.
3. Determine the increase/decrease by the transaction.
4. Enter the transaction into the general journal
 dates, account titles and explanation, references and two money
columns
EXAMPLE 1 (1)
On 1 Feb 2020, Ali invests cash of RM5,000 as capital into his
bookstore business.
Analyse the transaction
Prepare journal
Prepare ledger

BP12103, FPEP, UMS 8

 EXAMPLE 1 (2)
Effect (Analysis of transaction)
1. Increases asset of cash
2. Increases of capital

Journal

Date Transaction Debit (RM) Credit (RM)

2020
Feb 1 Debit Cash 5,000
Credit Capital 5,000
(Invested cash in business)

BP12103, FPEP, UMS 9

THE LEDGER AND POSTING
Every business has a general ledger. It contains all the assets,
liabilities and owner’s equity accounts.
Posting is the procedure of transferring journal entries to ledger
accounts, using these steps:
◦ In the ledger, enter the accounts debited/credited, the date,
journal page, and debit/credit the amount shown in the journal.
◦ In the reference column of the journal, write the account number
to which amount was posted.
 EXAMPLE 1 (3)
Ledger

Debit Cash Account Credit

Date Particular RM Date Particular RM
Feb 1 Capital 5,000

Debit Capital Account Credit

Date Particular RM Date Particular RM
Feb 1 Cash 5,000

BP12103, FPEP, UMS 11

 EXAMPLE 2 (1)
Continue from Example 1.
On 5 Feb 2020, Ali purchases computer worth RM2,000 for his
business by cash.
Analyse the transaction
Prepare journal
Prepare ledger

BP12103, FPEP, UMS 12

 EXAMPLE 2 (2)
Effect (Analysis of transaction)
1. Increases asset of computer
2. Decreases asset of cash

Journal
Date Transaction Debit (RM) Credit (RM)
2020
Feb 5 Debit Computer 2,000
Credit Cash 2,000
(Purchased computer for cash)

BP12103, FPEP, UMS 13

 EXAMPLE 2 (3)
Ledger
Debit Computer Account Credit
Date Particular RM Date Particular RM
Feb 5 Cash 2,000

Debit Cash Account Credit

Date Particular RM Date Particular RM
Feb 1 Capital 5,000 Feb 5 Computer 2,000

From Example 1

BP12103, FPEP, UMS 14

LIST OF LEDGERS (Example 1 AND Example 2)
Debit Cash Account Credit
Date Particular RM Date Particular RM
Feb 1 Capital 5,000 Feb 5 Computer 2,000

Debit Capital Account Credit

Date Particular RM Date Particular RM
Feb 1 Cash 5,000

Debit Computer Account Credit

Date Particular RM Date Particular RM
Feb 5 Cash 2,000

BP12103, FPEP, UMS 15

BALANCING OFF THE
LEDGER—T-ACCOUNTS
The balance of a three-column form of account is determined
after each transaction.
The balance of an account using T-accounts has to be
determined.
◦ If total debit > total credit  debit balance
◦ If credit side > total debit  credit balance
◦ If total debit = total credit  zero balance
 BALANCING OFF (1)
Debit Cash Account Credit
Date Particular RM Date Particular RM
Feb 1 Capital 5,000 Feb 5 Computer 2,000
Feb 29 Balance c/d 3,000

5,000 5,000

March 1 Balance b/d 3,000

BP12103, FPEP, UMS 17

 BALANCING OFF (2)
Debit Capital Account Credit
Date Particular RM Date Particular RM
Feb 1 Cash 5,000
Feb 29 Balance c/d 5,000

5,000 5,000

March 1 Balance b/d 5,000

BP12103, FPEP, UMS 18

 BALANCING OFF (3)
Debit Computer Account Credit
Date Particular RM Date Particular RM
Feb 5 Cash 2,000
Feb 29 Balance c/d 2,000

2,000 2,000

March 1 Balance b/d 2,000

BP12103, FPEP, UMS 19

PREPARING THE TRIAL BALANCE
 A trial balance is a list of all accounts and their balances at a
given time.
 It is to verify that total debits equals total credits.
 It is usually prepared at the end of the accounting period.
 Uncovers errors in journalising and posting.
 Procedures for preparing a trial balance:
◦ List all account titles and their balances
◦ Total the debit and credit columns
◦ Prove the equality of the two columns
 TRIAL BALANCE
Combine Example 1 and Example 2:

Bookstore
Trial Balance as at 29 February 2020
Account Debit (RM) Credit (RM)
Cash 3,000
Computer 2,000
Capital 5,000
5,000 5,000

BP12103, FPEP, UMS 21

LIMITATIONS OF A TRIAL BALANCE
 Even though its purpose is to prove the accuracy of the
double-entry system, a trial balance does not prove that all
transactions have been recorded correctly.
 Two categories of the errors:
◦ Errors not Affecting the Trial Balance – it will still balance
despite the recorded errors.
◦ Errors Affecting the Trial Balance – errors will lead to a
disagreement in the total debits/credits.
ERRORS NOT AFFECTING THE
TRIAL BALANCE
 Error of omission: A transaction is omitted and not
recorded at all.
 Error of commission: A transaction is recorded on the
wrong account of the same class.
 Complete reversal of entries: Offsetting errors are made in
recording the amount of a transaction.
 Error of principle: A transaction is recorded in the wrong
class of account.
ERRORS AFFECTING THE
TRIAL BALANCE
 Error of omission of one entry: Only one entry is made for
a transaction.
 Error of posting to the wrong side of an account
 Error of transposition: This occurs when the amount is
correctly recorded in one side of the accounts, but wrongly
recorded in the other side.
THANK YOU.