The Accounts of the General Ledger BALANCE SHEET SECTION DEBIT (DR) CREDIT (CR) CAPITAL DRAWINGS ASSETS INCOME EXPENSES NOMINAL SECTION LIABILITIES + - Wamark Publishers © - -

Transaction: Receive cash for rendering a service i.e. Current Income R Assets Income Expense DR Bank (A) CR DR Current Income (I) CR Current Income Bank Effect on Accounting Equation Bank is an Asset which increases. Current Income is an Income which always increases Owner’s Equity. A = O/E + L = Examples of businesses that provide services include hairdressers, doctors, babysitters, DJ’s, a carwash etc. Wamark Publishers ©

Transaction: Cash payments for Expenses e.g. stationery R100 Assets Income Expense DR Bank (A) CR DR Stationery (E) CR Stationery 100 Bank 100 Effect on Accounting Equation Bank is an Asset which decreases. Stationery is an expense which always decreases Owner’s Equity. A = O/E + L -100 = More examples of expenses : Fuel, salaries, wages, material costs. Packaging material, repairs, electricity, telephone, internet Wamark Publishers ©

Transaction: Cash payments for Assets e.g. Shoes to trade with R150 (Cost Price) Assets Income Expense DR Bank (A) CR DR Trading Inventory (A) CR Trading Inventory 150 Bank 150 Effect on Accounting Equation Bank is an Asset which is decreasing. Trading Inventory is also an Asset and is increasing. A = O/E + L Overall effect 0 More examples of Assets include: Buildings, Petty Cash, Equipment, Office Furniture and vehicles Wamark Publishers ©

Transaction: Cash Sale R 200 Cost of Sales (Cost Price) R 150 Assets Income Expenses DR Bank (A) CR DR Sales (I) CR DR Trading Inventory (A) CR DR Cost of Sales ( E) CR Trading Inventory 150 Cost of sales 150 Sales 200 Bank 200 Effect on Accounting Equation Sales is an Income. An income increases Owner’s Equity Bank is an Asset that increases when cash is deposited. A = O/E + L = Trading Inventory is an Asset which decreases when goods are sold. Cost of Sales (Cost Price) is an Expense which decreases Owner’s Equity A = O/E + L = The difference between the selling price and the cost price is called a profit Wamark Publishers ©