1. Chapter 2 The Double Entry System for assets, liabilities and capital
Learning Objectives
What is Double Entry?
Double Entry System follows the rules of the Accounting Equation
Transaction record in the individual accounts
T – account
The meaning by of the term Debit and Credit
Table showing on how to record increases and decreases of assets, liabilities and capital in accounts
Enter a series of transactions into T - accounts P1

2. 1. Double Entry A system where each transaction is entered twice,
one on the debit side and one on credit side of the account
Ex: Sale goods with cash to customer
Cash acc-Debit Sale acc-Credit

3. 2. Double Entry System follows the rules of the Accounting Equation
TITLE OF THE ACCOUNT WRITTEN HERE
Left hand side of the page Right hand side of the page
This is the Debit side This is the Credit side

4. In terms of assets, liabilities and capital :
To increase an asset we make a DEBIT entry
To decrease an asset we make a CREDIT entry
To increase a liability / capital a/c we make a CREDIT entry
To decrease a liability / capital a/c we make a DEBIT entry
Accounts
To record
Entry in the account
Assets
An increase
A decrease
Debit
Credit
Liabilities
Capital

5. The relationship between Rules of Debit & Credit and
Accounting Equation is as below :
Accounting Equation Asset = Liabilities Owner’s Equity
Rules Of Dr and Cr Dr Cr = Dr Cr Dr Cr

6. 3. Transaction recorded in the individual account
An account is a page specifically designed to record the changes in each individual item affecting the financial position. There is one account for each item.

7. 4. The layout of T-account
ACCOUNT TITLE HERE - the top stroke of the T
This line separates the 2 side and is the down stroke of the T

8. 5. The terms Debit and Credit
TITLE OF THE ACCOUNT WRITTEN HERE
Left hand side of the page Right hand side of the page
This is the Debit side This is the Credit side

9. To record increase in To record decrease ASSET in ASSET
DOUBLE ENTRY RULE FOR ASSET
ASSET a/c
To record increase in To record decrease ASSET in ASSET
Ex: Jan 1 Bought fixtures by cash RM5,000
Journal entries
Dr. Fixtures a/c RM 5,000
Cr. Cash/Bank a/c RM 5,000
Ledger entries

10. To record decrease in To record increase in LIABILITIES LIABILITIES
DOUBLE ENTRY RULE FOR LIABILITIES
LIABILITIES a/c
To record decrease in To record increase in LIABILITIES LIABILITIES
Ex: Jan 2 Bought fixtures by credit from Sherry RM1,000
Journal entries
Dr. Fixtures a/c RM 1,000
Cr. Creditor- Sherry a/c RM 1,000
Ledger entries

11. To record decrease in To record increase CAPITAL in CAPITAL
DOUBLE ENTRY RULE FOR CAPITAL
CAPITAL a/c
To record decrease in To record increase CAPITAL in CAPITAL
Ex: Jan 1 The owner deposited cash RM20,000 into the business
Journal entries
Dr. Cash/Bank a/c RM 20,000
Cr. Capital a/c RM 20,000
Ledger entries

12. End of Chapter 2