1
Introduction
to Double Entry
Accounting (複式簿記)
Reference:
Chapter 1 – 6 (p. 1 – 58)
1
(A) Introduction to
Accounting

Bookkeeping (簿記) vs. Accounting (會計)
– Bookkeeping:

records the accounting data in the books.
– Accounting:


provides important information to the owners and
managers of a firm.
records data; classifying and summarises data;
communicates information.
– Users of accounting information:


Internal: owners, managers, employees.
External: lenders, suppliers, customers, competitors,
government, the public.
2
(B) Accounting Equation
Assets (資產)
Capital (資產)
Liabilities (負債)
(Resources
= (Resources + (Resources
in the
supplied by
supplied by
business)
the owner)
outsiders)
e.g.
Assets
Bank
Cash
Machinery
Fixtures
Stock
Debtors
Motor Vehicles
Land
Building
Capital
Capital:
Chan
Capital:
Lee
Liabilities
Creditors
Bank overdraft
Bank loan
Loan: Cheung
3
Assets = Liabilities + Capital
After making profit:
Assets = Liabilities + Capital + Profit (Income – Expenses)
Examples of Income
Sales,
Rental income,
Commission received,
Interest received,
Returns outwards
Examples of Expenses
Purchases, Rent
Commission,
Interest expenses,
Electricity,
Wages and salaries,
Depreciation,
Returns inwards
4
After drawings by the sole proprietor (owner):
Assets = Liabilities + Capital + Profit - Drawings
Definition of Drawings (提取)
The sole proprietor may take cash, stock or
other assets from the business for private use.
5
Class work and Homework

Accounting equation (p. 14-16)
– Class work: Ex. 2.6, 2.8, 2.10, 2.11,2.13
– Homework: Ex. 2.7X, 2.9X, 2.12X,2.15X
6
(C) The Double Entry System

Definition
– Every transaction are entered into two T-accounts,
one in debit (Dr.) side and the other in the credit
(Cr.) side.

Format of a T-account:
Name of the T-account
Date Particular
Dr
$
Date Particular
$
Cr
7

5-steps (RC3D) for the double entry system:
1. Recognize the names of accounts
2. Classify the types of accounts (assets, liabilities,
capital, income, expenses or drawings)
3. Decide the increase or decrease of the accounts
4. Decide the debit or credit of the accounts
5. Draw up the T-accounts

Examples to apply the 5-steps:
On January 1, 2008, Chan started the business
with $1000 cash.
8
R
C
D
D
D
Cash
Assets
Increase
Dr.
Dr. Cash
Capital:
Chan
Capital
Increase
Cr.
Cr. Capital:
Chan
Dr. Cr.
Assets
+
-
Dr.
Liabilities
-
+
2008
Capital
-
+
Jan 1 Capital: Chan 1000
Incomes
-
+
Expenses +
-
Drawings
-
+
Dr.
2008
Cash
$
Cr.
2008
$
Capital: Chan
$
Cr.
2008
$
Jan 1 Cash
1000
9
Class work and Homework

Double entry system
– Supplementary Exercises (Worksheet)
– Assets, liabilities and capital (p.25-27)


Class work: Ex. 3.6, 3.8-3.10
Homework: Ex. 3.7X, 3.11X, 3.12X
– The treatment of stock (p.37-40)


Class work: Ex. 4.5, 4.8-4.10
Homework: Ex. 4.6X, 4,7X, 4.12X, 4.13X
– Revenue and expenses (p.48-50)


Class work: Ex. 5.6, 5.8, 5.10
Homework: Ex.
10
(D) Balancing the Account



Close (balance-off) the accounts at the
end of each month.
For examination, it may close the accounts
at the end of the year.
5 steps to balance-off an accounts:
1. Add the totals of debit and credit.
2. Find the difference between debit and credit.
(The difference
Balance c/d)
3. Enter the Balance c/d on the side with smaller
total.
4. Enter the totals on both sides at the same level.
5. Bring the Balance c/d to the opposite side as
Balance b/d on the first day of next month.
11
Class work and Homework

Balancing-off
– Supplementary Exercises (Worksheet)

Double entry system and balancing-off)
 Class
work: Ex. 7.6, 7.7, 7.9
 Homework: Ex. 7.8X, 7.10X
12