1. CHAPTER 5
Double-Entry System 2 2

2. Double-Entry System
The double-entry system is considered as the heart of modern accounting.
All accounting systems operate on the basis of the
double-entry system.
Manual accounting system
Computerized accounting system

3. Double-Entry System
The double-entry system provides checks and balances
to ensure that your books are always in balance.
In double-entry accounting,
each transaction has two
journal entries: a debit
and a credit.

4. Double-Entry System Credits ＝ Debits
The sum of all debits should always equal the sum of
all credits.
Because debits equal credits,
double-entry accounting
prevents some common
bookkeeping errors.

5. T Account The rules of the double-entry system are that one
The T account is the basic form of the double-entry system.
Title of Account
Left or
Debit Side
Right or
Credit Side
The rules of the double-entry system are that one
transaction affects at least two accounts
--- debit accounts and credit accounts.

6. Double-Entry System Accounting equation
Assets = Liabilities + Owner’s Equity
Account Type
Debit
Credit
Assets
Increase
Decrease
Liabilities
Owner’s equity
Income
Expenses

7. Now, let’s analyze the transaction of George Ross Photocopy Company …
Transaction Analysis
Now, let’s analyze the transaction of
George Ross Photocopy Company …

8. Transaction Analysis
Transaction 1
March 3: Mr. George starts his photocopy company
on March 1 with 20,000 us dollars that was
immediately deposited into the bank. ?
Increase or decrease
Assets
Owner’s equity
Debited or Credited

9. Transaction Analysis Cash at Bank $10,000 George Ross, Capital $10,000
Account Type
Debit
Credit
Cash at Bank
Increase
George Ross, Capital
Cash at Bank $10,000
George Ross, Capital $10,000

10. Transaction Analysis
Transaction 2
March 6: Rented another office, paying a year’s rent
in advance, $4,800 by check.
Increase or decrease ?
Assets 1
Debited or Credited
Assets 2

11. Transaction Analysis Prepaid Rent $4,800 Cash at Bank $4,800
Account Type
Debit
Credit
Prepaid Rent
Increase
Cash at Bank
Decrease
Prepaid Rent $4,800
Cash at Bank $4,800

12. Transaction Analysis
Transaction 3
March 7: Purchased photocopy equipment for $2,000
with cash.
Increase or decrease
Assets 1 ?
Debited or Credited
Assets 2

13. Transaction Analysis Photocopy Equipment $2,000 Cash $2,000
Account Type
Debit
Credit
Photocopy Equipment
Increase
Cash
Decrease
Photocopy Equipment $2,000
Cash $2,000

14. ? Transaction Analysis March 7: Purchased office equipment from Hougas
Equipment Co. for $5,300, paying $2,300 in cash and
agreeing to pay the rest next month.
Assets 1 ?
Increase or decrease
Assets 2
Debited or Credited
Liability

15. Transaction Analysis Office Equipment $5,300 Cash $2,300
Account Type
Debit
Credit
Office Equipment
Increase
Cash
Decrease
Accounts Payable
Office Equipment $5,300
Cash $2,300
Accounts Payable ,000

16. ? Transaction Analysis March 8: Purchased on credit photocopy supplies
for $2,300 an office supplies for $800 from Tim
Supply Co.
Increase or decrease
Assets ?
Liability
Debited or Credited

17. Transaction Analysis Photocopy Supplies $2,300 Office Supplies 800
Account Type
Debit
Credit
Photocopy Supplies
Increase
Office Supplies
Accounts Payable
Photocopy Supplies $2,300
Office Supplies
Accounts Payable $3,100

18. Transaction Analysis
Transaction 6
March 8: Paid $600 in cash for a one-year insurance
policy with coverage effective March 1.
Assets 1
Increase or decrease ?
Assets 2
Debited or Credited

19. Transaction Analysis Prepaid Insurance $600 Cash $600 Transaction 6
Account Type
Debit
Credit
Prepaid Insurance
Increase
Cash
Decrease
Prepaid Insurance $600
Cash $600

20. Transaction Analysis
Transaction 7
March 9: Paid Tim Supply Co. $3,100 of the amount
owed by check. ?
Increase or decrease
Assets
Debited or Credited
Liability

21. Transaction Analysis Accounts Payable $3,100 Cash at Bank $3,100
Account Type
Debit
Credit
Accounts Payable
Decrease
Cash at Bank
Accounts Payable $3,100
Cash at Bank $3,100

22. Transaction Analysis
Transaction 8
March 10: Performed a service by printing throwaways
for a garment dealer and agreed to collect the fee at the
beginning of the next month, $6,000. ?
Increase or decrease
Assets
Owner’s equity
Debited or Credited

23. Transaction Analysis Accounts Receivable $6,000
Account Type
Debit
Credit
Accounts Receivable
Increase
Photocopy Fees Earned
Accounts Receivable $6,000
Photocopy Fees Earned $6,000

24. ? Transaction Analysis March 14: Accept $1,300 as an advance fee for
copying works to be done for an advertising agency.
Increase or decrease
Assets ?
Liability
Debited or Credited

25. Transaction Analysis Cash $1,300 Unearned Photocopy Fees $1,300
Account Type
Debit
Credit
Cash
Increase
Unearned Photocopy Fees
Cash $1,300
Unearned Photocopy Fees $1,300

26. ? Transaction Analysis March 19: Performed a service by printing price
lists for Ward Fashion Company and collect a
check of $3,400.
Increase or decrease
Assets ?
Owner’s equity
Debited or Credited

27. Transaction Analysis Cash at Bank $3,400 Photocopy fees Earned $3,400
Account Type
Debit
Credit
Cash
Increase
Photocopy Fees Earned
Cash at Bank $3,400
Photocopy fees Earned $3,400

28. Transaction Analysis March 24: George Ross withdrew $980 from the
business for personal living expenses.
Account Type
Debit
Credit
George Ross, Withdrawals
Decrease
Cash
George Ross, Withdrawals $980
Cash $980

29. Transaction Analysis March 25: Paid the secretary salary, $1,100.
Account Type
Debit
Credit
Office Salary Expense
Decrease
Cash
Office Salary Expense $1,100
Cash $1,100

30. Transaction Analysis
Transaction 13
March 29: Received and not paid the utility bill of $700.
Account Type
Debit
Credit
Utility Expense
Decrease
Cash
Utility Expense $230
Cash $230

31. Transaction Analysis March 31: Received a telephone bill, $120.
Account Type
Debit
Credit
Telephone Expense
Decrease
Accounts Payable
Increase
Telephone Expense $120
Accounts Payable $120

32. T account Cash(at Bank) 3. $10,000 6. $4,800 14. 1,300 7. 2,000
3. $10,000
,300
,400
$4,800
,000
2,300
600
3,100
1,100
Bal. $410

33. T account Accounts Receivable Office Supplies 8. $800 10. $6,000
8. $800
$6,000
Bal. $800
Bal. $6,000
Prepaid Insurance
Photocopy Supplies
8. $2,300
8. $600
Bal. $2,300
Bal. $600

34. T account Prepaid Rent Office Equipment 7. $5,300 6. $4,800
7. $5,300
6. $4,800
Bal. $5,300
Bal. $4,800
Accounts Payable
Photocopy Equipment
7. $2,000
9. $3,100
8. 3,100
7. $3,000
Bal. $2,000
Bal. $600

35. T account Unearned Photocopy Fees George Ross, Withdrawal 24. $980
$980
$1,300
Bal. $1,300
Bal. $980
George Ross, Capital
Photocopy Fees Earned
3. $10,000
10. $6,000
,400
Bal. $10,000
Bal. $9,400

36. T account Office Salary Expense Telephone Expense 25. $1,100 31. $120
$1,100
$120
Bal. $120
Bal. $1,100
Utility Expense
$230
Bal. $230

37. T account On the basis of the T account calculation, we get the
result as follows:
Assets = Liabilities Owner’s Equity
$21, = $ $16,970

38. WE ARE SAILING RIGHT ALONG!!