1. The Accounts of the General Ledger BALANCE SHEET SECTION DEBIT (DR) CREDIT (CR) CAPITAL DRAWINGS ASSETS INCOME EXPENSES NOMINAL SECTION + - + + + + LIABILITIES + - Wamark Publishers © - -

2. Transaction: Receive cash for rendering a service i.e. Current Income R 1 000 Assets Income Expense + - + + DR Bank (A) CR DR Current Income (I) CR Current Income 1 000 Bank 1 000 Effect on Accounting Equation Bank is an Asset which increases. Current Income is an Income which always increases Owner’s Equity. A = O/E + L + 1 000 = + 1000 Examples of businesses that provide services include hairdressers, doctors, babysitters, DJ’s, a carwash etc. Wamark Publishers ©

3. Transaction: Cash payments for Expenses e.g. stationery R100 Assets Income Expense + - + + DR Bank (A) CR DR Stationery (E) CR Stationery 100 Bank 100 Effect on Accounting Equation Bank is an Asset which decreases. Stationery is an expense which always decreases Owner’s Equity. A = O/E + L -100 = - 100 More examples of expenses : Fuel, salaries, wages, material costs. Packaging material, repairs, electricity, telephone, internet Wamark Publishers ©

4. Transaction: Cash payments for Assets e.g. Shoes to trade with R150 (Cost Price) Assets Income Expense + - + + DR Bank (A) CR DR Trading Inventory (A) CR Trading Inventory 150 Bank 150 Effect on Accounting Equation Bank is an Asset which is decreasing. Trading Inventory is also an Asset and is increasing. A = O/E + L - 150 + 150 Overall effect 0 More examples of Assets include: Buildings, Petty Cash, Equipment, Office Furniture and vehicles Wamark Publishers ©

5. Transaction: Cash Sale R 200 Cost of Sales (Cost Price) R 150 Assets Income Expenses + - + + DR Bank (A) CR DR Sales (I) CR DR Trading Inventory (A) CR DR Cost of Sales ( E) CR Trading Inventory 150 Cost of sales 150 Sales 200 Bank 200 Effect on Accounting Equation Sales is an Income. An income increases Owner’s Equity Bank is an Asset that increases when cash is deposited. A = O/E + L + 200 = + 200 Trading Inventory is an Asset which decreases when goods are sold. Cost of Sales (Cost Price) is an Expense which decreases Owner’s Equity A = O/E + L - 150 = - 150 The difference between the selling price and the cost price is called a profit Wamark Publishers ©