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Charpter four Accounting methods. Debit side Credit side Luca Paciolio: Italian mathematician and Franciscan friar the father of accounting Summa de arithmetica, geometria, proportioni et proportionalita. 4.1 The Double-Entry System of Accounting. Double-entry accounting Debit - PowerPoint PPT Presentation
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Charpter four
Accounting methods
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4.1 The Double-Entry System of Accounting
• Debit side• Credit side• Luca Paciolio: • Italian mathematician and Franciscan friar the father of accounting Summa de arithmetica, geometria, prop
ortioni et proportionalita
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New words and terms 4.1
• Double-entry accounting
• Debit
• Credit
• balance
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4.2 The Account
• The T- Accounts
• Four-Column Account Format
• Normal balance of an account
• The chart of accounts
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Title
Dr Cr
Notes:Notes:
The T-account
The increase and decrease should be recorded seperatly on debit side or credit side of every accounts
The increase and decrease should be recorded seperatly on debit side or credit side of every accounts
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Four-column account format
Account: *** Accout No:***
Date Item Post.
Ref.
Debit Credit Balance
Debit Credit
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New words and terms 4.2• Increases• Decreases• Account classification• T-account• entry• running balance• post• JR=Journal Reference
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New words and terms 4.2
• debit-balance accounts
• credit-balnace accounts
• permanent accounts
• temporary accounts
• overdraw
• overpay
• miscellaneous expense
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4.3 Debits and Credits
• The symbol of debit and credit
Debit side: Dr
Credit side: Cr
• The rules of debit and credit
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Assets Liabilities
Owner’s equity
Beginning
balances XXX
XXXincrease XXXdecrease
XXXEnding
balances
XXXdecrease
Beginning
balances XXX
XXXincrease
XXX
Ending
balances
www.nordridesign.com LOGOSummary Summary
Account elements
The effects
Debit Credit balances
Assets + - Debits
Liabilites
Owner’s Equity- + Credits
Revenues - + no
Expenses + - no
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4.4 Applying for Double-Entry Accounting
• use of assets, liabilities and owner’s equity
• use of revenues, expenses and net income
www.nordridesign.com LOGOTransaction (1) :owner invested $ 30 000 cash in the business
• Assets = liabilities + Owner’s Equity
cash Ted Andy, Capital
+30000 +30000
www.nordridesign.com LOGOTransaction (2) :purchased office equipment on account, $ 2 500Assets = Liabilites + Owner’s EquityCash+ office = Accounts + Ted Andy, Capital
equipment payables
+2 500 = +2 500
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Transaction (3) :purchased office supplies for cash, $ 350Assets = Liabilites + Owner’s EquityCash+ office + office = Accounts + Ted Andy, Capital
supplies equipment payables
-350 +350
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Transaction (4) :paid amount owed to a creditor, $ 500
Assets = Liabilites + Owner’s EquityCash+ office + office = Accounts + Ted Andy, Capital
supplies equipment payables
-500 -500
www.nordridesign.com LOGOTransaction (5) :purchased office supplies on account, $ 400
Assets = Liabilites + Owner’s EquityCash+ office + office = Accounts + Ted Andy, Capital
supplies equipment payables
+400 = +400
www.nordridesign.com LOGO Transaction (6) :owner withdrew $ 300 for personal use
Assets = Liabilites + Owner’s EquityCash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense
supplies equipment payables Capital Drawing
-300 = +300
www.nordridesign.com LOGOTransaction (7) :received cash as payment for professional fees, $ 3 500Assets = Liabilites + Owner’s EquityCash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense
supplies equipment payables Capital Drawing
+3500 = +3500
www.nordridesign.com LOGO Transaction (8) :paid office rent $ 1 000
Assets = Liabilites + Owner’s EquityCash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense
supplies equipment payables Capital Drawing
-1000 = +1000
www.nordridesign.com LOGOTransaction (9) : paid telephone expense, $ 75
Assets = Liabilites + Owner’s EquityCash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense
supplies equipment payables Capital Drawing
- 75 = +75