Principles of

Accounting
(ACC 111) – Double entry accounting system

GHIAS UL HASSAN KHAN

MBA, ACCA, AICS, MCE, MIE
PHD – IN PROGRESS

Session 4, 5 &
6
Quote of the day

Riches does not mean, having a great

amount of property, but riches is self-
contentment mean self-satisfied
Prophet Mohammad (PBUH)

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 Agenda 1.

2.
Rules of debit and credit

Double entry

3. Ledger accounts

4. Trail balance

5. Practice Questions

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Rules of debit (Dr) and credit (Cr)
Heads Increase Decrease
Assets Dr Cr
Expense Dr Cr
Liability Cr Dr
Revenue / Income Cr Dr
Capital / Owner’s equity Cr Dr

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What is double entry accounting?

Every transaction (give and take) have two aspects.

STEPS – Double entry
[Link] the transaction
[Link] what increase or decrease
[Link] the items as per the heads of accounts
[Link] debit and credit rules
[Link] the entry in journal

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 Practice
a. Mr. Ahmed started business with cash 20,000
HOW TO WRITE IN JOURNAL
and building 75,000.

Cash increase in business Date Particulars P/R Debit Credit

Building increase in business A Cash 20,000

Capital increase in business

Building 75,000
Capital 95,000

Cash is an assets, so debit as increase

Building is an assets, so debit as increase

Capital credit as increase

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 Practice
b. Purchase merchandise of 2,000 cash
HOW TO WRITE IN JOURNAL
Merchandise increase in business
Date Particulars P/R Debit Credit
Cash decrease in business
B Merchandise 2,000
Cash 2,000

Merchandise is an assets, so debit as increase

Cash is an assets, so credit as decrease

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 Practice
c. Purchase merchandise of 6,000 in which 3,000
paid cash and balance on credit (on account) HOW TO WRITE IN JOURNAL
from Jameel brothers.
Date Particulars P/R Debit Credit
Merchandise increase in business
C Merchandise 6,000
Cash decrease in business
Cash 3,000
Accounts payable increase in business
Accounts Payable (Jameel) 3,000

Merchandise is an assets, so debit as increase

Cash is an assets, so credit as decrease

Accounts payable is a liability, so credit as increase

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 Practice
d. Paid to Jameel brothers
HOW TO WRITE IN JOURNAL
Cash decrease in business
Date Particulars P/R Debit Credit
Accounts payable also decrease in business
D Accounts Payable (Jameel) 3,000
Cash 3,000
Cash is an assets, so credit as decrease

Accounts payable is a liability, so debit as decrease

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 Practice
e. Sold merchandise for 2,000 cash
HOW TO WRITE IN JOURNAL
Cash increase in business
Date Particulars P/R Debit Credit
Sale also increase in business
E Cash 2,000
Sales 2,000
Cash is an assets, so debit as increase

Sales is an income, so credit as increase

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 Practice
f. Sold merchandise of 3,000 cash and 7,000 on
credit (on account) to Khaled company HOW TO WRITE IN JOURNAL

Cash increase in business

Date Particulars P/R Debit Credit
Accounts receivables also increase in business F Cash 3,000
Sales increase in business Accounts Receivables (Khaled) 7,000
Sales 10,000
Cash is an assets, so debit as increase

Accounts receivables is an assets, so debit as increase

Sales is an income, so credit as increase

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 Practice
g. Received half cash from Khaled
HOW TO WRITE IN JOURNAL
Cash increase in business
Dat Particulars P/ Debit Credit
Accounts receivables decrease in business
e R
G Cash 3,500
Cash is an assets, so debit as increase Accounts receivables (Khaled) 3,500

Accounts receivable also asset, so credit as decrease

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 Practice
h. Paid salaries 3,000 and rent of the building
HOW TO WRITE IN JOURNAL
2,000.

Cash decrease in business Date Particulars P/R Debit Credit

Salary expense increase in business H Salaries expense 3,000

Rent expense increase in business

Rent expense 2,000
Cash 5,000

Cash is an assets, so credit as decrease

Salaries and rent both are expenses, so debit as

increase

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Practice – Question 1
Habib Ullah Sadiq is wholesale trader; following transactions are record in Accounting
Equation?

[Link] (means started) business with cash Rs. 200,000 and Land Rs. 50,000.
[Link] merchandising for cash Rs. 80,000.
[Link] sales of worth Rs. 25,000.
[Link] goods on credit from Salman of worth Rs. 50,000.
[Link] on account to Ali Raza Rs. 12,000.
[Link] furniture of the value of Rs. 5,000 by cash.
[Link] cash form Ali Raza of Rs. 10,000.
[Link] defective furniture of worth Rs. 1,500.
[Link] wages Rs. 1,000, Rent 2,000 and Electricity Bill Payable Rs. 1,500.

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Practice – Question 2
Muhammad Farhan Abid had the following transactions. Use accounting equation to show
their effect on his Assets, Liabilities and Capital?

[Link] Rs. 15,000 in cash.

[Link] securities for cash Rs. 7,500.
[Link] a Land for Rs. 15,000: giving Rs. 5,000 in cash and balance on account.
[Link] securities costing Rs. 1,000 for Rs. 1,500.
[Link] an old car for Rs. 2,800 cash.
[Link] cash as salary Rs. 3,600.
[Link] cash Rs.500 for loan and Rs. 300 for interest.
[Link] cash for expenses Rs. 300.
[Link] cash for dividend on securities Rs.200.

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Practice – Question 3
Selected Transactions from Transport Services began on June 1, 2016, by Zahid Shah as?

[Link] Shah invested Rs. 600,000.

[Link] was Purchase by business for Rs. 430,000.
[Link] purchased on credit for Rs. 9,000.
4.A bill of Rs. 7,200 for transporting goods was sent to Mr. Ashraf Abbasi, a customer.
[Link] of Rs. 6,000 is received from the customer who was billed in d.
[Link] Rs. 22,300 is cash for transporting goods.
7.A payment of Rs. 5,000 was made on the equipment purchased in c.
[Link] expenses of different types for Rs. 1,700 in cash.
[Link] of Rs. 1,200 was withdrawn from business for Zahid Shah’s personal use.

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 Practice – Question 4
Prove that the Accounting Equation is satisfied in all following transactions of Waheeda Ejaz owner of
business enterprises?

[Link] business with cash value of Rs. 500,000.

[Link] paid in advance for a year Rs. 6,000.
[Link] merchandising inventory for cash Rs. 80,000 and on account Rs. 20,000 from Mr. Tahir.
[Link] Marketable securities for cash Rs. 100,000.
[Link] Sales Rs. 30,000 (cost 20,000).
[Link] the period rent expires Rs. 2,000.
[Link] paid during the trading was Rs. 1,000.
[Link] cash dividend Rs. 4,000 on marketable securities.
[Link] to Rs. 19,500 to Mr. Tahir in full settlement.
[Link] cash for personal purpose by owner of worth Rs. 6,000.
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Practice Question 5

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Practice Question 6

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Practice Question 7

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Thanks & continue to the next part

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