1. THE DOUBLE ENTRY FRAMEWORK
CHAPTER THREE
THE DOUBLE ENTRY FRAMEWORK

2. “T” Accounts
SHAPED
LIKE a “T”
Debit
Credit

3. “T” Accounts
Debit means
Left
Credit means
Right
Debit
Credit

4. “T” Accounts
Abbreviation
for Debit
Abbreviation
for Credit
Dr.
Cr.

5. “T” Accounts
ACCOUNT NAME
CASH
Dr.
Cr.

6. Every “T” Account has: An Increase Side, and A Decrease Side
But, Some Accounts Increase on the Debit Side
And, Some Accounts Increase on the Credit Side

7. 7 RULES OF
DEBITS AND CREDITS

8. RULE #1 + Increase on Debit Side Decrease on Credit Side Dr. Cr.
ASSET ACCOUNTS
Increase on
Debit Side
Decrease on
Credit Side
Dr.
Cr. +

9. EXAMPLE:
PURCHASED OFFICE SUPPLIES FOR $800 CASH

10. STEP #1
Name the accounts affected:
OFFICE
SUPPLIES
CASH

11. STEP #2 Determine Classification of Accounts ASSET OFFICE SUPPLIES
CASH
ASSET

12. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
CASH
OFFICE SUPPLIES
DR. +
CR.
DR. +
CR.

13. PURCHASED OFFICE SUPPLIES FOR $800 CASH
Did Office Supplies
Increase or Decrease
in this transaction?

14. INCREASED
OFFICE SUPPLIES
DR.
CR. +
$800

15. PURCHASED OFFICE SUPPLIES FOR $800 CASH
What about Cash?
Increase or Decrease
in this transaction?

16. DECREASED
CASH
DR.
CR. +
$800

17. IN EVERY TRANSACTION DEBITS MUST EQUAL CREDITS
RULE #2
IN EVERY TRANSACTION DEBITS MUST EQUAL CREDITS

18. DEBITS = CREDITS
OFFICE SUPPLIES
CASH
DR.
CR.
DR.
CR. + +
$800
$800

19. RULE #3 + Decrease on Debit Side Increase on Credit Side Dr. Cr.
LIABILITY ACCOUNTS
Decrease on
Debit Side
Increase on
Credit Side
Dr.
Cr. +

20. EXAMPLE:
PURCHASED EQUIPMENT ON ACCOUNT FOR $3,000.

21. STEP #1
Name the accounts affected:
ACCOUNTS
PAYABLE
EQUIPMENT

22. STEP #2 Determine Classification of Accounts: LIABILITY ASSET ACCOUNTS
PAYABLE
ASSET
EQUIPMENT

23. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
EQUIPMENT
ACCOUNTS PAYABLE
DR. +
CR.
DR.
CR. +

24. PURCHASED EQUIPMENT ON ACCOUNT FOR $3,000.
Did Equipment
Increase or Decrease
in this transaction?

25. INCREASED
EQUIPMENT
DR.
CR. +
$3000

26. PURCHASED EQUIPMENT ON ACCOUNT FOR $3,000.
Accounts Payable?
Increase or Decrease
in this transaction?

27. INCREASED
ACCOUNTS PAYBLE
DR.
CR. +
$3000

28. DEBITS = CREDITS + + EQUIPMENT ACCOUNTS PAYABLE DR. CR. DR. CR. $3000

29. RULE #4 + Dr. Cr. Decrease on Increase on Debit Side Credit Side
CAPITAL ACCOUNT
Decrease on
Debit Side
Increase on
Credit Side
Dr.
Cr. +
JUST LIKE
LIABILITY ACCOUNTS

30. EXAMPLE:
MARY ADAMS, THE OWNER, INVESTED $25,000 IN THE BUSINESS

31. STEPS #1 & 2 Name and classify the accounts affected: ASSET
OWNER’S EQUITY
ASSET
M. ADAMS, CAPITAL
CASH
DR.
CR.
DR.
CR.

32. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
M. ADAMS, CAPITAL
CASH + +
DR.
CR.
DR.
CR.

33. INCREASED OR DECREASED?
M. ADAMS, CAPITAL
CASH +
DR.
CR.
DR.
CR. +
$25,000
$25,000

34. DEBITS = CREDITS + + CASH M. ADAMS, CAPITAL DR. CR. DR. CR. $25,000

35. RULE #5 + Dr. Cr. JUST LIKE ASSET ACCOUNTS DRAWING ACCOUNT
Increase on the
Debit Side
Decrease on the
Credit Side
Dr.
Cr. +
JUST LIKE
ASSET ACCOUNTS

36. EXAMPLE:
MARY WITHDREW $1,500 FOR PERSONAL EXPENSES

37. STEPS #1 & #2 Name and classify the accounts affected: ASSET
OWNER’S EQUITY
ASSET
M. ADAMS, DRAWING
CASH
DR.
CR.
DR.
CR.

38. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
M. ADAMS, DRAWING
CASH +
DR.
CR.
DR.
CR. +

39. INCREASED OR DECREASED?
M. ADAMS, DRAWING
CASH
DR.
CR.
DR.
CR. + +
$1,500
$1,500

40. DEBITS = CREDITS + + M. ADAMS, DRAWING CASH DR. CR. DR. CR. $1,500

41. RULE #6 + Dr. Cr. Decrease on Increase on Debit Side Credit Side
REVENUE ACCOUNTS
Decrease on
Debit Side
Increase on
Credit Side
Dr.
Cr. +
JUST LIKE
LIABILITY & CAPITAL
ACCOUNTS

42. EXAMPLE:
MARY PERFORMED SERVICES AND RECEIVED $4,500 IN CASH

43. STEPS #1 & #2 Name and classify the accounts affected: ASSET
REVENUE
ASSET
CONSULTING FEES
CASH
DR.
CR.
DR.
CR.

44. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
CONSULTING FEES
CASH
DR.
CR.
DR.
CR. + +

45. INCREASED OR DECREASED?
CONSULTING FEES
CASH
DR.
CR.
DR.
CR. + +
$4,500
$4,500

46. DEBITS = CREDITS + + CASH CONSULTING FEES DR. CR. DR. CR. $4,500

47. EXAMPLE:
MARY PERFORMED $6,000 OF SERVICES ON ACCOUNT

48. DEBITS = CREDITS + + ACCOUNTS RECEIVABLE CONSULT. FEES DR. CR. DR. CR.
$6,000
$6,000
ACCOUNTS
RECEIVABLE
INSTEAD OF
CASH

49. RULE #7 + Dr. Cr. JUST LIKE ASSET ACCOUNTS EXPENSE ACCOUNTS
Increase on the
Debit Side
Decrease on the
Credit Side
Dr.
Cr. +
JUST LIKE
ASSET ACCOUNTS

50. MARY ADAMS PAID HER ASSISTANT $750 IN WAGES
EXAMPLE
MARY ADAMS PAID HER ASSISTANT $750 IN WAGES

51. STEPS #1 & #2 Name and classify the accounts affected: ASSET CASH
EXPENSE
ASSET
WAGES EXPENSE
CASH
DR.
CR.
DR.
CR.

52. STEP #3
Now that we know the classification, we can identify increase and decrease sides.
WAGES EXPENSE
CASH
DR.
CR.
DR.
CR. + +

53. INCREASED OR DECREASED?
WAGES EXPENSE
CASH
DR.
CR.
DR.
CR. + +
$750
$750

54. DEBITS = CREDITS
WAGES EXPENSE
CASH
DR.
CR.
DR.
CR. + +
$750
$750

55. BALANCING “T” ACCOUNTS
STEP #1
FOOT DEBIT
& CREDIT
SIDES
CASH
2,000
500
570
430 1
1,200
300
200
5050 80
650
150 1
FOOTING
3,500
To “Foot” means
to Total
FOOTING
3,130

56. BALANCING A “T” ACCOUNT
STEP #2: Find balance by finding the difference between the debit and credit totals.
$3,500 debit footing
– $3,130 credit footing
$ 370 balance

57. BALANCING “T” ACCOUNTS
Balance is
written on
side with
larger
total
CASH
2,000
500
570
430 1
1,200
300
200
5050 80
650
150 1
3,500
BALANCE
370
3,130

58. TRIAL BALANCE LIST OF ALL ACCOUNTS INCLUDING THEIR BALANCES
TOTALING DEBITS AND CREDITS
PROVING DEBITS EQUAL CREDITS
USED AS AN AID IN PREPARING FINANCIAL STATEMENTS

59. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
HEADING should include:
Name of the Company
Title of Document “Trial Balance”
Date of the Trial Balance

60. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
All Asset accounts
listed first

61. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
Accounts Payable
Liabilities are
shown next

62. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
Accounts Payable
Jessica Jane, Capital
Jessica Jane, Drawing
Now the Owner’s Equity
Accounts

63. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
Accounts Payable
Jessica Jane, Capital
Jessica Jane, Drawing
Delivery Fees
Then the Revenue Account

64. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
Finally, the Expenses
Accounts Payable
Jessica Jane, Capital
Jessica Jane, Drawing
Delivery Fees
Wages Expense
Rent Expense
Telephone Expense
50 00

65. Jessica Jane’s Campus Delivery Trial Balance June 30, 20--
Account Title
Debit Balance
Credit Balance
Cash
It Balances!!!
Debits = Credits
Accounts Receivable
Supplies
80 00
Prepaid Insurance
Delivery Equipment
Accounts Payable
Jessica Jane, Capital
Jessica Jane, Drawing
Delivery Fees
Wages Expense
Rent Expense
Telephone Expense
50 00