1. AAT Level 2 Certificate in accounting Louise Johnson Louise.johnson@eastdurham. ac.uk

2. Chapter 3 Double entry bookkeeping

3. Slide 3 Double entry For every transaction in business 2 entries will be made A company makes a sale to a customer and receives in return a payment in cash. The business has to record both the sales and the receipt of money hence; the double entry

4. Slide 4 Debits and credits Double entry is recorded by way of a debit and a credit in a T account Debit Credit

5. Slide 5 The debit will always appear on the left and the credit will always appear on the right This will NEVER change To remember this; Debit Drive on the left Credit Crash on the right

6. Slide 6 Principles of Double Entry Bookkeeping: DEAD CLIC DebitCredit ExpenseLiability AssetIncome DrawingsCapital

7. Types of Transactions – Debit Entries Expenses – Revenue Expenditure –Rent –Wages –Purchases Assets – Capital expenditure and Existing assets Bank –Machinery –Debtors Drawings –Money taken by the owner for his own personal use Slide 7

8. Types of Transactions – Credit entries Liabilities – Money owed by the business –Creditors –Loans Income – Revenue (not money) –Sales –Interest received Capital – Money invested by the owner –Capital introduced Slide 8

9. Remember! Transactions get BIGGER on these sides Slide 9 DebitCredit ExpenseLiability AssetIncome DrawingsCapital

10. Slide 10 Example 1 Cash Sales of £200 £ sales 200 DebitCredit £ cash 200 Debit Credit Sales Cash

11. Slide 11 Ex 2 Capital introduced to Bank £20000 DebitCredit £ Debit Credit Bank Capital 20X2 £ 1 st July capital 20000 £ 1 st July cash 20000 MAIN LEDGER

12. Slide 12 Purchases made £250 by cheque Debit Credit Debit Credit Bank Purchases 20X2 £ 1 st July capital 20000 £ 2 nd July purchases 250 £ 2 nd July bank 250

13. Slide 13 Rent Paid by cheque £225 DebitCredit £ 2 nd July purchases 250 Debit Credit Bank Rent 20X2 £ 1 st July capital 20000 £ 3 rd July rent 225 £ 3 rd July bank 225

14. Slide 14 Cash sales £657 DebitCredit £ Debit Credit Cash Sales 20X2 £ 4th July sales 657 £ 4 th July cash 657 £

15. Slide 15 Rates paid by cheque £135 DebitCredit £ 2 nd July purchases 250 Debit Credit Bank Rates 20X2 £ 1 st July capital 20000 £ 3rd July rent 225 4 th July rates 135 £ 4 th July bank 135

16. Slide 16 Sold goods on Credit to J Henry £750 £ 5 th July sales 750 DebitCredit £ 4 th July cash 657 Debit Credit Sales Debtors 20X2 £ £ 5 th July J Henry 750

17. Slide 17 Bought goods on credit C Bableton £450 £ DebitCredit £ Debit Credit Purchases Creditors 20X2 £ 2nd July bank 250 £ 5 th July purchases 450 5 th July C Bableton 450