DTM5013/DTM40123 PRINCIPLES OF ACCOUNTING FOR TOURISM & HOSPITALITY/HRIA
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TOPIC 4
LEDGER & TRIAL BALANCE
4.O
DOUBLE ENTRY CONCEPT
4.1.1 Understand the Double Entry Concept
Double entry accounting is a record keeping system under which every transaction
is recorded at least two accounts.
It also known as
ACCOUNTING EQUATION
.
There is no limit on the number of accounts that may be used in a transaction, but
the minimum is two accounts.
The sum of all debits of the transaction must be equaled to the sum of credit of
transactions
Debit entries will not necessary means an increase in the value of an account, and
the credit will not necessary means a decrease value of account.
4.1.2 Illustrate the transaction using T Account
The normal balance according to the type of accounts is shown in Table below.
ACCOUNT TYPES
NORMAL BALANCE
DEBIT
CREDIT
Assets
√
Expenses
√
Drawings
√
Liabilities
√
Owner’s equity
√
Revenue
√
At the end of this chapter, students should be able to:
Demonstrate mastery of knowledge and understanding of a
ledger
Demonstrate mastery of knowledge and understanding of
Trial Balance
LEARNING OUTCOMES
DTM5013/DTM40123 PRINCIPLES OF ACCOUNTING FOR TOURISM & HOSPITALITY/HRIA
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ASSETS
=
LIABILITIES
+
EQUITY
Debit
Credit
Debit
Credit
Debit
Credit
+
-
-
+
-
+
The effect of double entry on the balance of ledger account.
EFFECT ON
VALUE OF
BALANCE
ACCOUNTS TYPE
Assets
Expenses
OE
(Drawing) =
Liabilities
OE
(Capital)
Revenues
DEBIT
(DT)
↑
↑
↑
↓
↓
↓
CREDIT
(CT)
↓
↓
↓
↑
↑
↑
THE ACCOUNTING EQUATION
The Accounting Equation and Lists of its Component
ACCOUNTING EQUATION
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The nature of Assets, Liabilities, Owner’s Equity, Revenue and Expenses
ASSETS
o
Assets are valuable resources that are owned by a firm to help operate
business
o
Divided into 2 main categories
–
Non-Current Assets (NCA)
–
Current Assets (CA)
o
Assets accounts have a
DEBIT
balance
o
Characteristic of non-current assets and current assets
ASSETS
CHARACTERISTICS
EXAMPLE
Non-Current
Assets
a.
Asset life is longer than one
accounting period
b.
Can be used repeatedly
c.
Fixed value
Premise
Land
Plant & machineries
Office equipment
Motor vehicle
Fixtures and fittings
Furniture
Current Assets
Assets that are easily converted
into cash.
Value is not fixed.
Cash
Bank
Debtors
Inventories
Prepaid expenses
Accrued revenue
LIABILITIES
o
Debts owed by a business entity to external parties
o
Divided into:
–
Long term liabilities (NCL)
–
Current liabilities (CL)
o
Liabilities accounts have a
CREDIT
balance
o
Characteristic of non-current liabilities and current liabilities
LIABILITIES
CHARACTERISTICS
EXAMPLE
Non-Current
Liabilities
Debt that must be paid off after
one accounting period
Bank Loan
Debentures
Mortgage
Current
Liabilities
Debt that must be paid off within
one accounting period
Creditors
Bank Overdraft
Accrued
expenses
Unearned/Prepaid
revenues
