The document discusses the principles of double entry accounting. It explains the debit and credit rules for assets, liabilities, owner's equity, expenses, and revenue. It provides examples of journal entries for transactions involving these accounts. It also covers concepts like stock, transportation costs, trade discounts, and cash discounts.

1. ACC106
Chapter 3
PRINCIPLES OF DOUBLE ENTRY
( THE RECORDING PROCESS)

2. LEARNING OBJECTIVES

3. 3.1 Introduction

4. DOUBLE ENTRY PRINCIPLES
Classification DEBIT CREDIT
Assets increase in Assets decrease in Assets
Liability decrease in Liabilities increase in Liabilities
Capital/ Owner’s equity decrease in Owner’s Equity increase in Owner’s Equity
Revenue decrease in Revenue increase in Revenue
Expenses increase in Expenses decrease in Expenses

5. DOUBLE ENTRY PRINCIPLES FOR ASSETS
 The double entry principle for assets is:
Assets a/c
Debit Credit
To record increase in Assets To record decrease in Assets
i.e Jan 1 Bought equipment paying by cheque RM 1,000
Dr. Equipment a/c RM 1,000
Cr. Bank a/c RM 1,000
Equipment a/c
Jan 1 Bank 1,000
Bank a/c
Jan 1 Equipment 1,000

6. DOUBLE ENTRY PRINCIPLES FOR
LIABILITIES
 The double entry principle for liabilities is:
Liabilities a/c
Debit Credit
To record decrease in Liabilities To record increase in Liabilities
i.e Jan 2 Bought equipment on credit from Streamyx Sdn. Bhd. RM 2,000
Dr. Equipment a/c RM 2,000
Cr. Creditor a/c – Streamyx Sdn. Bhd. RM 2,000
Equipment a/c
Jan 2 Creditor 2,000
Creditor a/c – Streamyx Sdn. Bhd a/c
Jan 2 Equipment 2,000

7. DOUBLE ENTRY PRINCIPLES FOR
OWNER’S EQUITY
 The double entry principle for Owner’s Equity is:
Owner’s Equity a/c
Debit Credit
To record decrease in Owner’s Equity To record increase in Owner’s Equity
i.e Jan 1 The owner started business with RM 10,000 cash in bank
Dr. Bank a/c RM 10,000
Cr. Capital a/c. RM 10,000
Bank a/c
Jan 1 Capital 10,000
Capital a/c
Jan 1 Bank 10,000

8. DOUBLE ENTRY PRINCIPLES FOR
EXPENSES
I) The double entry principle for Expenses is:
Expenses a/c
Debit Credit
To record increase in Expenses To record decrease in Expenses
i.e Jan 6 Paid salary by cheque RM 300
Dr. Salary a/c RM 300
Cr. Bank a/c. RM 300
Salary a/c
Jan 6 Bank 300
Bank a/c
Jan 6 Salary 300

9. DOUBLE ENTRY PRINCIPLES FOR
REVENUE
II) The double entry principle for Revenue is:
Revenue a/c
Debit Credit
To record decrease in Revenue To record increase in Revenue
i.e Jan 8 Received cash for house rental RM 450
Dr. Cash a/c RM 450
Cr. Rent Received a/c. RM 450
Cash a/c
Jan 8 Rent received 450
Rent Received a/c
Jan 8 Cash 450

10. DOUBLE ENTRY PRINCIPLES FOR STOCK
 The double entry are as follows:
Transactions Effects Double entry
Purchased of goods Purchase Expense Increase Debit Purchases a/c
Sales of goods Sales Revenue Increase Credit Sales a/c
Purchases Returns Purchase Expense decrease Credit Purchase Returns a/c
Sales Returns Sales Revenue decrease Debit Sales Return a/c

11. Example
Transactions Effects Double entry
Purchased goods: Purchase Expense Increase DR Purchases a/c
Purchased goods on credit Liability creditor increase CR Creditor (Siti) a/c
from Siti Ent
Sales of goods: Sales Revenue Increase DR Debtor (Zila) a/c
Credit Sales to Zila Asset debtor increase CR Sales a/c
Purchases Returns: Liability creditor decrease DR Creditor (Siti) a/c
Returned goods to Siti Purchase Expense decrease CR Purchase Returns a/c
Enterprise
Sales Returns: Sales Revenue decrease DR Sales Return a/c
Zila returned defective goods Asset debtor decrease CR Debtor (Zila) a/c

12. DOUBLE ENTRY PRINCIPLES FOR STOCK
(cont’d)
Purchases a/c
Jan 6 Creditor - Siti Enterprise 2, 000
Creditor - Siti Enterprise a/c
Jan 6 Purchases 2,000
i.e 2. Jan 7 Returned goods to Siti Enterprise RM 100
Journal entries
Dr. Creditor - Siti Enterprise RM 100
Cr. Purchases Return a/c RM 100
Creditor - Siti Enterprise a/c
Jan 7 Purchases Return 100 Jan 6 Purchases 2,000
Purchases Return a/c
Jan 7 Creditor 100

13. DOUBLE ENTRY PRINCIPLES FOR STOCK
(cont’d)
i.e 3. Jan 8 Credit Sales to Zila RM 400
Journal entries
Dr. Debtor – Zila a/c RM 400
Cr. Sales a/c RM 400
Debtor – Zila a/c
Jan 8 Sales 400
Sales a/c
Jan 8 Debtor - Zila 400

14. DOUBLE ENTRY PRINCIPLES FOR STOCK
(cont’d)
i.e 4. Jan 15 Zila returned defective goods worth RM 40
Journal entries
Dr. Return Inwards a/c RM 40
Cr. Debtor – Zila a/c RM 40
Return Inwards a/c
Jan 15 Debtor – Zila 40
Debtor – Zila a/c
Jan 8 Sales 400 Jan 15 Return Inwards 40

15. DOUBLE ENTRY PRINCIPLES FOR STOCK
(cont’d)
i.e 5. Jan 17 Bought goods from Jenny paying by cheque RM 400
Journal entries
Dr. Purchases a/c RM 400
Cr. Bank a/c RM 400
Purchases a/c
Jan 17 Bank 400
Bank a/c
Jan 17 Purchases 400

16. DOUBLE ENTRY PRINCIPLES FOR STOCK
(cont’d)
i.e 6. Jan 19 Cash sales to Ali Baba RM 240
Journal entries
Dr. Cash a/c RM 240
Cr. Sales a/c RM 240
Cash a/c
Jan 19 Sales 240
Sales a/c
Jan 19 Cash 240

17. TRANSPORTATION COST FOR
PURCHASE & SALES OF GOODS
Transportation Costs DOUBLE ENTRY ACCOUNT TO RECORD
Freight or carriage DR Carriage outwards a/c Trading a/c
outwards: CR Cash/ Bank a/c (as part of the cost of goods
The cost of transport paid to purchased)
send the goods sold to the
buyer’s premises
Freight or carriage D R Carriage inwards a/c Profit & Loss a/c
inwards: C R Cash/ Bank a/c (expenses)
The cost of transport paid to
bring in the goods bought to
the business premises

18. DOUBLE ENTRY PRINCIPLES FOR
TRADE DISCOUNT

19. DOUBLE ENTRY PRINCIPLES FOR TRADE
DISCOUNT (cont’d)
Journal entries
Dr. Purchases a/c RM 1,900
Cr. Creditor - Teepah Trading RM 1,900
Purchases a/c
Jan 25 Creditor – Teepah Trading 1,900
Creditor - Teepah Trading a/c
Jan 25 Purchases 1,900

20. DOUBLE ENTRY PRINCIPLES FOR
CASH DISCOUNT

21. DOUBLE ENTRY PRINCIPLES FOR
CASH DISCOUNT
Journal entry 1 Journal entry 2
Discount Received DR Creditor a/c DR Creditor a/c
CR Discount Receive a/c CR bank a/c
Discount Allowed DR Discount Allowed a/c DR Bank a/c
CR Debtor a/c CR Debtor

22. DOUBLE ENTRY PRINCIPLES FOR
CASH DISCOUNT
Example: Journal entry 1 Journal entry 2
Discount Received: DR Creditor (Jenny) a/c DR Creditor (Jenny) a/c
Paid supplier - Jenny RM38 RM1862
Trading RM1900 by
cheque after deducting CR Discount Receive a/c CR Bank a/c
cash discount 2% RM38 RM1862
Discount Allowed DR Discount Allowed a/c DR Bank a/c
Ahmad (debtor) paid RM60 RM2940
RM3,000 by cheque after CR Debtor a/c CR Debtor a/c
deducting cash discount RM60 RM2940
of 2%

23. DOUBLE ENTRY PRINCIPLES FOR
CASH DISCOUNT (cont’d)
Creditor – Jenny Trading
Jan31 Discount Received 38 Jan 18 Purchases 1,900
Jan 31 Bank 1,862
1,900 1,900
Discount Received a/c
Jan 31 Jenny Trading 38
Bank a/c
Jan 31 Jenny Trading 1,862

24. DOUBLE ENTRY PRINCIPLES FOR
CASH DISCOUNT (cont’d)
Debtor - Ahmad
Jan 19 Sales 3,000 Jan 31 Discount allowed 60
Jan 31 Bank 2,940
3,000 3,000
Discount Allowed a/c
Jan 31 Debtor – Ahmad 60
Bank a/c
Jan 31 Debtor – Ahmad 2,940