You are the Accountant
For every exercise you do,
pretend that you are the accountant for the business.
Wamark Publishers ©
The General Ledger
Format of the General Ledger
CREDIT
CR
DEBIT
DR
Balance Sheet Section
Bank
B3
Stationery
100
Nominal Section
Stationery
Bank
100
N4
Double Entry Rule
This looks like a “T” so it is also called a T account
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The Accounts of the General Ledger
BALANCE SHEET SECTION
CAPITAL (O/E)
CREDIT (CR)
+
DEBIT (DR)
+
DRAWINGS (O/E)
+
ASSETS (A)
-
-
LIABILITIES (L)
+
NOMINAL SECTION
-
INCOME (I)
+
+
EXPENSES (E)
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Owner’s Equity (O/E)
+
Capital
The Capital is banked
into the business bank
account
The Owner
The money used to start up a business is called
Capital. The owner lends the Capital to the
business. The owner can increase his/her capital
contribution at any time. Capital is an Owners
Equity Account.
Owner’s Equity increases when the owner makes a capital contribution
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Owner’s Equity
The two Owner’s Equity Accounts are: Capital and Drawings
Transaction: The owner makes a capital contribution of R 20 000
Capital
+
DR
Drawings
Capital(O/E) CR
Bank
20 000
+
Effect on Accounting Equation
Capital increases Owner’s Equity.
Bank is an Asset that increases when
a capital contribution is made.
A
+ 20 000
DR
Capital
Bank (A)
20 000
CR
Assets
=
O/E
+
= + 20 000
L
The owner may contribute capital as
many times as he/she wishes.
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Owner’s Equity (O/E)
Drawings
-
The Owner withdraws
money form the
business bank account
for personal use
The Owner
When the Owner draws money from the business
bank account for his/her own personal use e.g. to
go on holiday, it is called drawings. Drawings is an
Owners Equity Account.
Owner’s Equity decreases when the owner makes a drawing
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Owner’s Equity
The two Owner’s Equity Accounts are: Capital and Drawings
Transaction: The owner drew R 1 500 for personal use.
Capital
Drawings
+
DR
Bank
+
Drawings(O/E) CR
Assets
+
Effect on Accounting Equation
Drawings decreases Owner’s Equity.
Bank is an Asset that decreases
when a drawing is made.
1 500
A
- 1 500
DR
-
Bank (A)
CR
Drawings 1 500
=
O/E
= - 1 500
+
L
The owner may make drawings
as many times as he/she wishes.
Wamark Publishers ©