1. Introduction to Double Entry Accounting (複式簿記)1
Introduction to Double Entry Accounting (複式簿記)
Reference:
Chapter 1 – 6 (p. 1 – 58)

2. (A) Introduction to Accounting
Bookkeeping (簿記) vs. Accounting (會計)
Bookkeeping:
records the accounting data in the books.
Accounting:
provides important information to the owners and managers of a firm.
records data; classifying and summarises data; communicates information.
Users of accounting information:
Internal: owners, managers, employees.
External: lenders, suppliers, customers, competitors, government, the public.

3. (B) Accounting Equation
Assets (資產)
(Resources
in the
business)
Capital (資產) (Resources supplied by the owner)
Liabilities (負債)
(Resources
supplied by
outsiders) = +
e.g.
Assets
Bank
Cash
Machinery
Fixtures
Stock
Debtors
Motor Vehicles
Land
Building
Capital
Capital: Chan
Capital: Lee
Liabilities
Creditors
Bank overdraft
Bank loan
Loan: Cheung

4. Assets = Liabilities + Capital
After making profit:
Assets = Liabilities + Capital + Profit (Income – Expenses)
Examples of Income
Sales,
Rental income,
Commission received,
Interest received,
Returns outwards
Examples of Expenses
Purchases, Rent
Commission,
Interest expenses,
Electricity,
Wages and salaries,
Depreciation,
Returns inwards

5. After drawings by the sole proprietor (owner):
Assets = Liabilities + Capital + Profit - Drawings
Definition of Drawings (提取)
The sole proprietor may take cash, stock or other assets from the business for private use.

6. Class work and Homework
Accounting equation (p )
Class work: Ex. 2.6, 2.8, 2.10, 2.11,2.13
Homework: Ex. 2.7X, 2.9X, 2.12X,2.15X

7. (C) The Double Entry System
Definition
Every transaction are entered into two T-accounts, one in debit (Dr.) side and the other in the credit (Cr.) side.
Format of a T-account:
Name of the T-account
Date
Particular $ Cr Dr

8. 5-steps (RC3D) for the double entry system:
Recognize the names of accounts
Classify the types of accounts (assets, liabilities, capital, income, expenses or drawings)
Decide the increase or decrease of the accounts
Decide the debit or credit of the accounts
Draw up the T-accounts
Examples to apply the 5-steps:
On January 1, 2008, Chan started the business with $1000 cash.

9. R C D Cash Assets Increase Dr. Dr. Cash Capital: Chan Capital Cr.
Cr. Capital: Chan
Dr.
Cr.
Assets + -
Liabilities
Capital
Incomes
Expenses
Drawings
Dr Cash Cr.
2008 $
Jan 1
Capital: Chan
1000
Dr Capital: Chan Cr.
2008 $
Jan 1
Cash
1000

10. Class work and Homework
Double entry system
Supplementary Exercises (Worksheet)
Assets, liabilities and capital (p.25-27)
Class work: Ex. 3.6,
Homework: Ex. 3.7X, 3.11X, 3.12X
The treatment of stock (p.37-40)
Class work: Ex. 4.5,
Homework: Ex. 4.6X, 4,7X, 4.12X, 4.13X
Revenue and expenses (p.48-50)
Class work: Ex. 5.6, 5.8, 5.10
Homework: Ex.

11. (D) Balancing the Account
Close (balance-off) the accounts at the end of each month.
For examination, it may close the accounts at the end of the year.
5 steps to balance-off an accounts:
Add the totals of debit and credit.
Find the difference between debit and credit. (The difference Balance c/d)
Enter the Balance c/d on the side with smaller total.
Enter the totals on both sides at the same level.
Bring the Balance c/d to the opposite side as Balance b/d on the first day of next month.

12. Class work and Homework
Balancing-off
Supplementary Exercises (Worksheet)
Double entry system and balancing-off)
Class work: Ex. 7.6, 7.7, 7.9
Homework: Ex. 7.8X, 7.10X