1. Double Entry
System DR CR

2. Accounting Equation

3. Assets = Owner’s Equity + Liabilities
Items of value owned by the business
The funds of a business provided by its owners and the profits entitled to him
Debts owed by a business to external parties such as suppliers

4. Assets = Owner’s Equity + Liabilities
Building
Motor vehicle
Office Equipment
Fixtures
Stock (closing)
Cash in hand
Cash at bank
Capital
Profits
Creditors
Loan from bank
Other creditors
* Explain these terms to students

5. Assets = Owner’s Equity + Liabilities
Every transaction will affect 2 items.
The equation will still balance!

6. TRANSACTION THAT AFFECTS BOTH ASSET AND OWNER’S EQUITY
A = OE L
TRANSACTION THAT AFFECTS BOTH ASSET AND LIABILITY
ASSET  LIABILITY 
ASSET  LIABILITY 
TRANSACTION THAT AFFECTS BOTH ASSET AND OWNER’S EQUITY
ASSET  OWNER’S EQUITY 
ASSET  OWNER’S EQUITY 

7. TRANSACTION THAT AFFECTS LIABILITY  LIABILITY 
A = OE L
TRANSACTION THAT AFFECTS
ASSETS ONLY
ASSET  ASSET 
TRANSACTION THAT AFFECTS
LIABILITIES ONLY
LIABILITY  LIABILITY 

8. Examples : A = OE + L a) John began business with cash in hand $5000.
Cash $ Capital $5000
The firm took a bank loan of $8000.
Cash $ Bank Loan $8000
Being purchase of motor vehicle from
ABC Trading for $2000.
Motor Vehicle $ Cash $2000

9. Examples : A = OE + L d) Being payment of $500 to Creditor, Peter.
Cash  $ Creditors  $500
e) Being receipt of $3500 in cheque from a debtor.
Debtors  $ Cash at Bank $3500

10. Examples : A = OE + L f) Being repayment of bank loan for $1500.
Cash  $ Bank Loan  $1500
g) Being purchase of office equipment from
Lee Trading on credit for $780.
Office Equipment $ Creditors$ (Lee Trading)

11. Assets = Owner’s Equity + Liabilities
ACCOUNTING EQUATION
Assets = Owner’s Equity Liabilities

12. What is a Balance Sheet?
It is a report that is used to present the Accounting Equation that involves a firm’s total assets, total owner’s equity and total liabilities of an accounting period.
It is a report that external parties like investors or bankers look at when making important business decisions.
How does it look like?
Click me!

13. Assets = Owner’s Equity +
Liabilities
BALANCE SHEET AS AT 1 Jan 2000
Fixed Assets $ $
Building
Office Equipment
Motor Vehicle
Fixtures
Current Assets
Stock (*closing)
Debtors
Bank
Cash
Owner’s Equity $
Capital
Add: Profits
Less: Drawings
Long Term Liabilities
Loan from bank
Current Liabilities
Creditors
Other creditors
Same figure

14. a) Owner brought in cash $2000 as additional capital
A = OE L
BALANCE SHEET AS AT 1 Jan 2000
Owner’s Equity $
Capital
Long Term Liabilities
Loan from bank
Current Liabilities
Creditors
Fixed Assets $ $
Motor Vehicle 25000
Fixtures
35050
Current Assets
Stock
Debtors
Cash
12600
47650
Example 2 :
+ 2000
+ 2000
a) Owner brought in cash $2000 as additional capital

15. b) Owner paid off the loan $1000
BALANCE SHEET AS AT 1 Jan 2000
Owner’s Equity $
Capital
Long Term Liabilities
Loan from bank
Current Liabilities
Creditors
Fixed Assets $ $
Motor Vehicle 25000
Fixtures
35050
Current Assets
Stock
Debtors
Cash
12600
47650
Example 2 :
+ 2000
- 1000
- 1000
b) Owner paid off the loan $1000

16. c) Owner paid creditors $1100
BALANCE SHEET AS AT 1 Jan 2000
Owner’s Equity $
Capital
Long Term Liabilities
Loan from bank
Current Liabilities
Creditors
Fixed Assets $ $
Motor Vehicle 25000
Fixtures
35050
Current Assets
Stock
Debtors
Cash
12600
47650
Example 2 :
+ 2000
- 1000
- 1100
- 1100
c) Owner paid creditors $1100

17. BALANCE SHEET AS AT 31 Dec 2000 Owner’s Equity $ $ Capital 40000
Long Term Liabilities
Loan from bank
Current Liabilities
Creditors
Fixed Assets $ $
Motor Vehicle 25000
Fixtures
35050
Current Assets
Stock
Debtors
Cash
12500
47550

18. IN CLOSING…