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DOUBLE ENTRY SYSTEM

Meaning:
Is the book keeping principle of recording transactions twice in a book of account whereby the principle states that every debit entry must have corresponding credit entry and every credit entry must have corresponding debit entry with the same amount.
The fundamental rule to double entry system is to debit the account what is received and credit what is given out.
Example Mr. Juma started business on 1st June 2008 with capital in cash 30,000/=
June 2. With capital in cash 30,000/=
3. Bought goods for cash Sh. 22,000/=
4. Sold goods for cash of Sh 27,000/=
5. Paid carriages sh 850/=
10. Cash sales sh 12,000/=
15. Bought goods for cash sh 25,000/=
18. Paid rent sh 1,200/=
20. Paid advertising sh. 1,200/=
22. Sold goods for cash sh. 15,000/=
25. Cash sales to date sh. 20,000/=
26. Paid wages goods for cash sh 500/=
27. Purchased goods for cash sh 500/=
28. Sold goods for cash sh 350/=
Record the transactions in the appropriate ledger account.
Solution
DR
CASH A/C (L 1) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/6/2008
capital
2
30000
2/6/2008
Furniture
3
1000

4/6/2008
Sales
5
27000
5/6/2008
Purchase
4
22000
10/6/2008
Sales
5
12000
5/5/2008
carriage
6
850
22/6/2008
Sales
5
15000
15/6/2008
Purchases
4
25000
25/6/2008
Sales
5
20000
18/6/2008
Rent
7
1200
28/6/2008
Sales
5
350
20/6/2008
Advert
8
750
26/6/2008
Wages
9
500
27/6/2008
Purchases
4
500
Dr CAPITAL ACCOUNT (2) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio

Amount
1/6/2008
cash
30000


Dr FURNITURE ACCOUNT (3) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio

Amount
2/6/2008
Cash
1000

Dr PURCHASES ACCOUNT (4) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
3/6/2008
Cash
22,000
15/6/2008
Cash
25,000
27/6/2008
Cash
500


Dr SALES ACCOUNT (5) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
4/6/2008
Cash

27000
10/6/2008
Cash
12000
22/6/2008
Cash
15000
25/6/2008

Cash
20000
28/6/2008
Cash
350
Dr CARRIAGE ACCOUNT (6) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
5/6/2008
Cash
850
Dr RENT ACCOUNT (7) Cr

Dr WAGES ACCOUNT (9) Cr
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
26/6/
2008
Cash
500
EXERCISE
Tatu commenced a business on 1st August 1980 by introducing Sh. 30,000 in cash.
August 1. Purchased goods for cash 15,000
1. Paid carriage on goods purchased 100.
5. Sold goods for cash 13,000
6. Paid carriage on sales 150
10. Cash purchases 10,000
15. Cash sales 12,500
20. Paid laborers in cash 1,200
25. Paid Electricity 50
28. Cash sales 1,000
30. Paid water bill in cash 45TQ
30. Payment made for purchases 5,000
Post the above transactions in the ledger.

DR CASH ACCOUNT ( L 1 ) CR

Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/8/1980
capital
2
30000
1/8/1980
Purchases
3
15000
5/8/1980

Sales
5
13000
1/8/1980
Carriage
4
100
15/8/1980
Sales
5
12500
6/8/1980
Carriage
4
150
28/8/1980
Sales

5
1000
10/8/1980
Purchase
3
10000
20/8/1980
Laborers
6
1200
25/8/1980
Electricity
7
50
30/8/1980
Water bill
8
45
30/8/1980
Purchases
3
5000

DR CAPITAL ACCOUNT (2) CR

Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/8/1980
cash
30,000
DR PURCHASES ACCOUNT (3) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/8/1980
Cash
15,000
31/8/1980
Balance c/d
30,000
10/8/1980
Cash

10,000
30/8/1980
Cash
5,000
30,000
30,000
DR CARRIAGE ACCOUNT (4) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
1/8/1980
Cash
100
6/8/1980
Cash
150
250
250
DR SALES ACCOUNT (5) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
15/8/1980
Cash
12500
28/8/1980
Cash
1000
26500
26500
DR LABORERS ACCOUNT (6) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
20/8/1980
Cash
1200
DR ELECTRICITY ACCOUNT (7) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
25/8/1980
Cash
50
DR WATER BILL ACCOUNT (8) CR
Date
Particular
Folio
Amount
Date
Particular
Folio
Amount
30/8/1980
Cash
45
CREDIT TRANSACTIONS
A Credit transactions is a situations whereby goods are sold or bought but payments made later.
But the principles of book keeping requires that whenever the transactions made on Cash or on Credit, the records must be kept.

Sales on Credit
When goods are sold on Credit, the usual entries are Dr personal a/c to show the receipts of goods by the customers and credit sales a/c with the value of goods sold during that period.

Example:
Mr Juma bought goods costing Tshs 20,000 on credit from Hamida.
Solutions:
Double entry in the books Mr.Juma
Example.2
Mathew sold goods on credit to Janeth Tshs 40,000/=.
Double entry in the books of Mathew.
The Balancing of Accounts
Means that each side of the account is total and the difference between two sides (Dr & Cr) is ascertained.
Balance lies on the side which has greater for example if the credit side is greater than debit side, the balance called credit balance.

The balance is written on the side has smaller/lesser total in order to make each side equal and the word balance c/d or c/f means balance carry down or forward of the trading period and then brought down or forward the balance by indicate the word (b/d & b/f) to the other side belong to the total as the example below shows:

Example:
record the following transactions in the ledger 2013.
Jan 1 Commence business with Cash 60,000
2 Purchased goods for Cash 30,000
3 Paid office cleaners 2,000
4 Sold goods for cash 40,000
5 Paid wages 3,000
8 Purchased goods on credit from Ally 20,000
10 Sold goods to Aika for 25,000
11 Paid Ally in his account 10,000
12 Received from Aika 25,000
Enter the above transactions and balance the accounts at the end of the January and brought down the balance.
Solution






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EcoleBooks | BOOK KEEPING O LEVEL(FORM ONE) NOTES - DOUBLE ENTRY SYSTEM

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