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1、5-1Double-Entry System CHAPTER 5CHAPTER 55-2Learning objectivesl1. Understand the principles of double-entry system.l2. Be able to use T-account to calculate the balances.l3. Use double-entry system to analyze the transactions.5-3Double-Entry SystemThe double-entry system is considered as the heart
2、of modern accounting. All accounting systems operate on the basis of the double-entry system. Manual accounting system Computerized accounting system 5-4Double-Entry SystemThe double-entry system provides checks and balances to ensure that your books are always in balance. In double-entry accounting
3、, each transaction has two journal entries: a debit and a credit. 5-5Double-Entry SystemCreditsDebitsBecause debits equal credits, double-entry accounting prevents some common bookkeeping errors. The sum of all debits should always equal the sum of all credits. 5-6T Account The T account is the basi
4、c form of the double-entry system. Title of AccountLeft orDebit Side Right orCredit Side The rules of the double-entry system are that one transaction affects at least two accounts - debit accounts and credit accounts.5-7Double-Entry System Assets = Liabilities + Owners EquityAccounting equation Acc
5、ount TypeDebitCredit Assets IncreaseDecrease Liabilities DecreaseIncreaseOwners equityDecreaseIncrease Income DecreaseIncrease ExpensesIncrease Decrease 5-8 Transaction AnalysisNow, lets analyze the transaction of Steve Barber Shop5-9Transaction AnalysisTransaction 1 March 3: Mr. Taylor started his
6、barber shop with 10,000 US dollars that was immediately deposited into the bank. AssetsOwners equity ?Increase or decreaseDebited or Credited5-10Transaction AnalysisTransaction 1 Account TypeDebitCredit Cash IncreaseStev Taylor, CapitalIncrease Cash $10,000Stev Taylor, Capital $10,000 5-11Transactio
7、n AnalysisTransaction 2 March 7: Purchased haircutting equipment for 800 with cash.Assets 1Assets 2?Increase or decreaseDebited or Credited5-12Transaction AnalysisTransaction 3 Account TypeDebitCredit Haircutting Equipment Increase Cash DecreaseHaircutting Equipment 800 Cash $8005-13Transaction Anal
8、ysisTransaction 4 March 7: Purchased store equipment from Hougas Equipment Co. for 2,400, paying 1,400 in cash and agreeing to pay the rest next month. Assets 1Assets 2?Increase or decreaseDebited or CreditedLiability5-14Transaction 4 Transaction AnalysisAccount TypeDebitCredit Store Equipment Incre
9、aseCashDecreaseAccounts PayableIncreaseStore Equipment $2,400Cash $400Accounts Payable $ 1,0005-15Transaction AnalysisTransaction 5 March 8: Purchased on credit haircutting supplies for 400 and office supplies for 200 from Tim Supply Co.AssetsLiability?Increase or decreaseDebited or Credited5-16Tran
10、saction AnalysisTransaction 5 Account TypeDebitCredit Haircutting Supplies IncreaseOffice SuppliesIncreaseAccounts Payable IncreaseHaircutting Supplies $400Office Supplies $200 Accounts Payable $600 5-17Transaction AnalysisTransaction 6 March 8: Paid 600 in cash for a one year insurance policy with
11、coverage effective from March 1. Assets 1Assets 2?Increase or decreaseDebited or Credited5-18Transaction 6 Transaction AnalysisAccount TypeDebitCredit Prepaid Insurance IncreaseCashDecreasePrepaid Insurance $600 Cash $600 5-19Transaction AnalysisTransaction 7 March 9: Paid Tim Supply Co. 600 of the
12、amount owed.Assets?Increase or decreaseDebited or CreditedLiability5-20Transaction 7 Transaction AnalysisAccount TypeDebitCredit Accounts Payable DecreaseCash at Bank DecreaseAccounts Payable $600Cash at Bank $6005-21Transaction AnalysisTransaction 8 March 10: Provided haircutting services to a mode
13、l company and agreed to collect the fee at the beginning of the next month, 900.Assets?Increase or decreaseDebited or CreditedOwners equity5-22Transaction 8 Transaction AnalysisAccount TypeDebitCredit Accounts Receivable IncreaseHaircutting Services Revenue IncreaseAccounts Receivable $900Photocopy
14、Fees Earned $9005-23Transaction AnalysisTransaction 9 March 14: Accepted 1,300 as an advance fee for haircutting services to be done for an advertising agency.AssetsLiability?Increase or decreaseDebited or Credited5-24Transaction 9 Transaction AnalysisAccount TypeDebitCredit Cash IncreaseUnearned Ha
15、ircutting FeesIncreaseCash $1,300Unearned Haircutting Fees $1,3005-25Transaction AnalysisTransaction 10 March 19: Provided haircutting services and collected a check of 1,400.Assets?Increase or decreaseDebited or CreditedOwners equity5-26Transaction 10 Transaction AnalysisAccount TypeDebitCredit Cas
16、hIncreaseHaircutting Services RevenueIncreaseCash at Bank $1,400 Photocopy fees Earned $1,400 5-27Transaction 11 Transaction AnalysisAccount TypeDebitCredit Stev Taylor, Withdrawals DecreaseCashDecreaseStev Taylor, Withdrawals $480Cash $480 March 24: Stev Taylor withdrew 480 from the business for pe
17、rsonal living expenses.5-28Transaction 13 Transaction AnalysisAccount TypeDebitCredit Utility Expense DecreaseCashDecreaseUtility Expense $230 Cash $230 March 29: Received and not paid the utility bill of $230. 5-29Transaction 14 Transaction AnalysisAccount TypeDebitCredit Telephone Expense Decrease
18、Accounts Payable IncreaseTelephone Expense $120 Accounts Payable $120 March 31: Received a telephone bill, $120. 5-30T accountCash Bal. $8,390 3. $10,00014. 1,30019. 1,400 7. 8007. 1,4008. 6009. 60024. 48029. 2305-31T accountAccounts Receivable 10. $900 Bal. $900 Haircutting Supplies 8. $400 Bal. $4
19、00 Office Supplies 8. $200 Bal. $200 Prepaid Insurance 8. $600Bal. $600 5-32T accountHaircutting Equipment 7. $800 Bal. $800 Store Equipment 7. $2,400 Bal. $2,400 Accounts Payable 9. $600Bal. $920 7. $1,0008. 600 31. 120 5-33T accountUnearned Haircutting Fees 14. $1,300 Bal. $1,300 Stev Taylor, Capi
20、tal3. $10,000 Bal. $10,000 Stev Taylor, Withdrawals 24. $480 Bal. $480 Haircutting Services RevenueBal. $9,400 10. $6,00019. 3,4005-34T accountUtility Expense 29. $230 Bal. $230 Telephone Expense 31. $120 Bal. $120 5-35T accountOn the basis of the T account calculation, we get the result as follows: Assets = Liabilities + Owners Equity$21,390 = $4420 + $16,970 5-36WE ARE SAILING RIGHT ALONG!
