1. The Double Entry System
Assets
Cash at bank
Shop
Inventory
Account receivable
Capital
28,000
32,000
6,400
600
60,000
Account payable
(7,000)
Mr Black sells some inventory for £400, and receives the payment instantly.
Assets
Cash at bank
Shop
Inventory
Account receivable
Capital
28,400
32,000
6,000
600
60,000
Account payable
(7,000)
Double Entry Book-Keeping is based upon the idea that every transaction affects two aspects

2. The accounts for double entry
An ‘account’ is a record of all transactions in particular departments in a business.

3. Capital Assets Liabilities
To increase each item
CREDIT
DEBIT
To decrease each item

4. The accounts for double entry
If a business buys stationary valued at £40 and pays for it using cash, then two things have happened.
The value in the business’s cash account will have decreased by £40
The value in the business’s stationary account has increased by £40
Example: Paid cash for a van costing £3,000
Van comes IN to the Business (debit the van account)
The cash goes OUT of the business (credit the cash account) IN
OUT Dr Cr

5. The accounts for double entry
Example: Paid cash for a van costing £3,000
Van comes IN to the Business (debit the van account)
The cash goes OUT of the business (credit the cash account)
VAN account
Cash account Dr Cr Dr Cr
Cash £3,000
Van £3,000
The owner starts the business with £10,000 in cash.
Cash account
Capital account Dr Cr Dr

6. Equipment is bought on credit from ‘B.B Company’ for £1,250
Equipment account
B.B Company account Dr Cr Dr Cr
You have paid the B.B Company the £1,250.
B.B Company account
Cash account Dr Cr Dr Cr

7. Now complete the double accounting work sheet
Cut the margins
Stick in book

8. Homework –
Make and complete accounts using the following information.
Jan 1 – Started Business with £30,000 in bank
Jan 5 – Bought stock of goods paying £2,770 cheque
Jan 7 – Bought a van, £4,800 cheque
Jan 9 – Sold goods for £680 cash
Jan 10 - Bought desk & chair for the office for £110 cash
Jan 15 – Sold goods for £500 cheque
Jan 22 - Paid £92 cash for motor expenses
Jan 29 Sold goods for £325 cash
Jan 30 – Bought more goods, paid £1090 cheque