Chapter 2 Double entry bookkeeping

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Objectives

Explain the principles of the double entry bookkeeping system. State the rules of debit and credit for each group of accounts. Describe the flow of information through an accounting system.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Objectives (continued)

Explain the nature and purpose of journals and their relationship to the ledger. Explain the nature and purpose of a ledger. Record a variety of business transactions in appropriate ledger accounts. Explain the nature and purpose of a Trial Balance.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Double entry
Some examples of double entry are : using cash to purchase a motor vehicle a debtor paying an account paying cash to a creditor the owner withdrawing assets from the business.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Double entry (continued)

There are at least two entries for each transaction: an amount is recorded as a debit with a corresponding amount being recorded as a credit. Double entry transactions are entered into all Journals.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Debit and credit rules

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Flow of information
Source documents:

sales invoices purchase invoices cash register tapes cheque butts credit notes.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Flow of information (continued)

Types of journals:

general journal

specialised journals.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Flow of information (continued)

Types of ledgers:

general ledgers

subsidiary ledgers.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Flow of information (continued)

The Trial Balance

shows all the balances of the accounts in the General Ledger is the basis for the preparation of the financial statements.

The Statement of Financial Performance

shows the financial performance of the business.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Flow of information
(continued)

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Functions of a journal:

categorises similar items together

provides a permanent record of the transaction classifies items into debit and credit
assists in posting transactions to the ledger.

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Cash receipts journal

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Cash payments journal

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Sales journal

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Purchases journal

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Sales and purchase return

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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General journal

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Ledgers

T Account

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Ledgers (continued)

Columnar format

Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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Trial Balance

Trial Balance assists in finding: arithmetic error recording only half of an entry.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business A non-accountants guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven

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