PRINCIPLES AND PRACTICE OF DOUBLE ENTRY

Subject: 

ACCOUNTING

Term:

FIRST TERM

Week:

WEEK 4

Class:

SS 1

Topic:

PRINCIPLES AND PRACTICE OF DOUBLE ENTRY

Behavioural objectives:

At the end of the lesson, the learners will be able to

• Explain the rule of double entry
• apply the rules of double entry

Previous lesson: 

The pupils have previous knowledge of

 ETHICS OF ACCOUNTING

that was taught as a topic in the previous lesson

Instructional Materials:

• Wall charts
• Pictures
• Related Online Video
• Flash Cards

Methods of Teaching:

• Class Discussion
• Group Discussion
• Asking Questions
• Explanation
• Role Modelling
• Role Delegation

Reference Materials:

• Scheme of Work
• Online Information
• Textbooks
• Workbooks

PRINCIPLES AND PRACTICE OF DOUBLE ENTRY

CONTENT

The Concept of Double Entry System

Review of Double Entry with Comprehensive Illustrations

The Concept of Double Entry System

Among the oldest known and indisputable principles of accounting is the Double Entry principle.

The principle states that, ‘for every debit entry there must be a corresponding credit entry’, which in everyday English means that for every receiver there must be a giver.

The receiver is always regarded as the Debtor whiles the giver as a creditor under this principle.

As far as double entry principle is concerned, there must always be two parties to a transaction. One entry at the debit side for the debtor or the receiver and the other entry at the credit side for the creditor or the giver.

Review of Double Entry with Comprehensive Illustrations

The Principles of Double Entry

The double entry principles applied by observing two rules. The rule states that debit all receivers, credit all givers; meaning that, the double entry system of bookkeeping will be used for recording transactions in the ledgers.

Summary:

Debit = Receiving account

Credit = Giving account

Procedures to be followed:

Every transaction must affect two accounts

Give names to the two accounts

Debit – Receiving account (Receiver)

Credit – giving account (Giver)

ILLUSTRATION

Illustration 1

Jan. 1 Miss. Faith starts business with ₦800.00 in bank

There are two accounts involved:

Capital account—-giving—-Credit = ₦800.00

Bank account—-receiving—-Debit = ₦800.00

Miss. Faith is the owner of the business therefore her name must not appear in the books.

Entries in the ledger

DR CAPITAL ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 1 ₦

Bank 800

DR BANK ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ ₦

Jan. 1 Capital 800

Jan. 2 purchased goods ₦300.00 by cheque.

Two accounts are involved:

Purchases account—-receiving—-Debit = 300.0

Bank account—-giving—-Credit = 300.00

DR PURCHASES ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ ₦

Jan. 2 Bank 300

DR BANK ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 2 ₦

Purchases 300

Jan. 4 Sold goods ₦700.00 cash

Two accounts are involved:

Sales account—-giving—-Credit = ₦700.00

Cash account —-receiving—-Debit = ₦700.00

DR SALES ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 4 ₦

Cash 700

DR CASH ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ ₦

Jan. 4 Sales 700

Jan. 7 Paid wages N50.00 cash

Two accounts are involved:

Wages account —-Receiving—-Debit = N50.00

Cash account —-Giving—-Credit = N50.00

DR WAGES ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan ₦ ₦

7 Cash 50

DR CASH ACCT CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. ₦ Jan. 7 ₦

Wages 50

Jan. 8 bought machinery N500.00 paying by cheque

Two accounts are involved:

Machinery account—-Receiving—-Debit =500.00

Bank account—-Giving—-Credit =500.00

DR MACHINERY ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 8 ₦ ₦

Bank 500

DR BANK ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 8 ₦

Machinery 500

Jan. 10 Cash drawings N80.00

Two accounts are involved:

Cash account—-Giving—-Credit =80.00

Drawings account—-Receiving—-Debit =80.00

DR CASH ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 10 ₦

Drawings 80

DR DRAWINGS ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ ₦

Jan. 10 cash 80

Jan. 12 Goods returned to us by Baba N200.00

Two accounts are involved:

Returned inward account—-Receiving—-Debit =N200.00

Baba’s account—-Giving—-Credit =N200.00

DR RETURN ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ ₦

Jan. 12 Baba 200

DR BABA ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 12 ₦

Returned 200

Jan.17 Took cash N2, 400.00 from the bank and put it into cash till.

Two accounts are involved:

Bank account—-Giving—-Credit =N2, 400.00

Cash account —-Receiving—-Debit =N2,400.00

DR BANK ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 17 ₦

Cash 2,400.00

DR CASH ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 17 ₦ ₦

Bank 2,400.00

Jan. 20 we returned goods worth N100.00 to Jasper

Two accounts are involved:

Returned outward account—-Giving—-Credit = N100.00

Jasper account —-Receiving—-Debit = N100.00

DR RETURNED OUTWARD ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 20 ₦

Jasper 100

DR JASPER ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 20 ₦ ₦

Returned outward 100

Jan. 22 received commission in Cash N350.00

Two accounts are involved:

Commission—-Giving—-Credit = N350.00

Cash—-Receiving—-Debit = N350.00

DR COMMISSION ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 22 ₦

Cash 350

DR CASH ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 22 ₦ ₦

Commision 350

Jan. 23 took loan from Mark by cheque N750.00

Two accounts are involved:

Loan (Mark)—-Giving—-Credit =N750.00

Bank—-Receiving—-Debit =N750.00

DR LOAN ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 23 ₦

Bank 750

DR BANK ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 23 ₦ ₦

Loan 750

Jan. 25 sold car on credit to Ojo N220.00

Two accounts are involved:

Car account—-Giving—-Credit =N220.00

Ojo account—-Receiving—-Debit =N220.00

DR CAR ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 25 ₦

Ojo 220

DR OJO ACCT. CR

Date Particulars Folio Amount Date Particulars F Amount

₦ ₦

Jan. 25 Car 220

Jan. 27 paid cash for repairs of Motor Vehicle N1, 500.00

Two accounts are involved:

Motor Vehicle—-Receiving—-Debit =N1, 500.00

Cash—-Giving—-Credit =N1, 500.00

DR MOTOR REPAIR ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

Jan. 27 ₦ ₦

Cash 1,500.00

DR CASH ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 27 ₦

Motor Vehicle 1,500.00

Jan 30 withdrew N1, 000 cash for personal use

Two accounts are involved:

Drawings—-Receiving—–Debit =N1, 000.00

Cash—-Giving—-Credit =N1, 000.00

DR DRAWING ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 10 ₦

Jan. 30 Cash 1,000.00

DR CASH ACCT. CR

Date Particulars Folio Amount Date Particulars Folio Amount

₦ Jan. 30 ₦

drawings 1,000.00

Evaluation

1. What is the fundamental accounting equation?

A) Assets = Equity + Revenue

B) Assets = Liabilities + Equity

C) Revenue = Expenses + Net Income

D) Equity = Liabilities + Owner’s Investment

2. Which of the following is not a type of business entity?

A) Corporation

B) Government

C) Partnership

D) Sole Proprietorship

3. What is the primary purpose of financial accounting?

A) To track and report the financial position of a business

B) To provide information for external users to make decisions

C) To produce financial statements

D) To manage the financial affairs of a business

4. What is the double entry bookkeeping system?

A) A system where each transaction is recorded in at least two different accounts

B) A system where each transaction is recorded only once

C) A system where each transaction is balanced before it is recorded

D) A system where each transaction is made in two different books

5. What are the three fundamental financial statements?

A) Balance sheet, income statement, and cash flow statement

B) Income statement, cash flow statement, and statement of changes in equity

C) Balance sheet, income statement, and statement of cash flows

D) Cash flow statement, income statement, and balance sheet

Marking Guide

1. B) Assets = Liabilities + Equity

2. D) Sole Proprietorship

3. B) To provide information for external users to make decisions

4. A) A system where each transaction is recorded in at least two different accounts

5. C) Balance sheet, income statement, and statement of cash flows

Assignment

Explain the principle of double entry system.