Unit 3 Recording BusinessTransactions: Double-Entry System1.Recording Business Transactions②T-account①SetupofAccount2.Double-Entry System②ActivitiesTherule of debit and credit
Unit 3 Recording Business Transactions: Double-Entry System 1.Recording Business Transactions ①Setup of Account ②T-account 2.Double-Entry System ①The rule of debit and credit ②Activities
I Recording Business TransactionsDSetupofAccountAccounts are the foundation of recordingaccounting entries and preparing financial statements.The reference number of account is in order tofacilitate accounting identification and transactionentry
Ⅰ Recording Business Transactions ①Setup of Account Accounts are the foundation of recording accounting entries and preparing financial statements. The reference number of account is in order to facilitate accounting identification and transaction entry
Balance Sheet1.Assets2.Liabilities101 Cash201 Accounts Payable102 Accounts Receivable202 Notes Payable103NotesReceivable203 Salaries Payable104 Office Supplies204 Unearned Revenue105 Equipment106Inventory107 Prepaid Insurance3.Owner's Equity108 Land301 Paid-in Capital109Accumulated302 Retained EarningsDepreciation110ntangible Assets303 Withdrawals
Balance Sheet ◼ 1.Assets ◼ 101 Cash ◼ 102 Accounts Receivable ◼ 103 Notes Receivable ◼ 104 Office Supplies ◼ 105 Equipment ◼ 106 Inventory ◼ 107 Prepaid Insurance ◼ 108 Land ◼ 109 Accumulated Depreciation ◼ 110Intangible Assets ◼ 2.Liabilities ◼ 201 Accounts Payable ◼ 202 Notes Payable ◼ 203 Salaries Payable ◼ 204 Unearned Revenue ◼ 3.Owner’s Equity ◼ 301 Paid-in Capital ◼ 302 Retained Earnings ◼ 303 Withdrawals
Income Statement5.Expense4.Revenue501 Salary Expense401 Sales Revenue502 Telephone Expense402 Interest Revenue503SuppliesExpense504 Advertising Expense505Rent Expense506 Gas Expense507Insurance Expense508 Depreciation Expense
Income Statement ◼ 4.Revenue ◼ 401 Sales Revenue ◼ 402 Interest Revenue ◼ 5.Expense ◼ 501 Salary Expense ◼ 502 Telephone Expense ◼ 503 Supplies Expense ◼ 504 Advertising Expense ◼ 505 Rent Expense ◼ 506 Gas Expense ◼ 507 Insurance Expense ◼ 508 Depreciation Expense
Balance Sheet (Chinese)1.Assets2.Liabilities1001 Cash2001 Short-term Borrowing1002 Cash in bank2201AccountsPayable1121Notes Receivable2202Notes Payable1122AccountsReceivable2211 Salaries Payable1123 Prepaid expenses2231InterestPayable2232 Dividend Payable1221Other receivable1501Held-to-maturityinvestment2401DeferredIncome1521 Investment Property2901DeferredTaxLiability1601Fixed assets3.Owner's Equity1602AccumulatedDepreciation4001Paid-in Capital4103 Current Year Profit1701IntangibleAssets1702Amortization4104Profit Distribution1711 Goodwill
Balance Sheet (Chinese) ◼ 1.Assets ◼ 1001 Cash ◼ 1002 Cash in bank ◼ 1121 Notes Receivable ◼ 1122 Accounts Receivable ◼ 1123 Prepaid expenses ◼ 1221 Other receivable ◼ 1501 Held-to-maturity investment ◼ 1521 Investment Property ◼ 1601 Fixed assets ◼ 1602 Accumulated Depreciation ◼ 1701 Intangible Assets ◼ 1702 Amortization ◼ 1711 Goodwill ◼ 2.Liabilities ◼ 2001 Short-term Borrowing ◼ 2201 Accounts Payable ◼ 2202 Notes Payable ◼ 2211 Salaries Payable ◼ 2231 Interest Payable ◼ 2232 Dividend Payable ◼ 2401 Deferred Income ◼ 2901 Deferred Tax Liability ◼ 3.Owner’s Equity ◼ 4001 Paid-in Capital ◼ 4103 Current Year Profit ◼ 4104 Profit Distribution
Income Statement(Chinese6.Profitandloss6001SalesRevenue6011InterestRevenue6111InvestmentIncome6301Non-operatingIncome6401CostOfSales6601 Selling Expense6602AdministrativeExpense6603FinancialExpense6711Non-operating expenditure6801Income Tax
Income Statement (Chinese) ◼ 6. Profit and loss ◼ 6001 Sales Revenue ◼ 6011 Interest Revenue ◼ 6111 Investment Income ◼ 6301 Non-operating Income ◼ 6401 Cost Of Sales ◼ 6601 Selling Expense ◼ 6602 Administrative Expense ◼ 6603 Financial Expense ◼ 6711 Non-operating expenditure ◼ 6801 Income Tax
2)T-accountAccount TitleCreditDebitTitle of AccountsidesideLeft sideRight sideDebit balanceCredit balanceDRRDifferencea7betweenthedebit side andMSthe credit side1
② T-account DR CR Left side Right side Title of Account Debit balance Credit balance Account Title Debit side Credit side Difference between the debit side and the credit side
Example 1CashCr.Dr.$60,000$50,0005002,000Bal.7,500
Example 1 Cash $60,000 $50,000 500 2,000 Bal. 7,500 Dr. Cr
Example 2Accounts PayableDr.Cr.$ 60,000$150,000100,00040,0002,000Bal.32,000
Example 2 Accounts Payable $ 60,000 100,000 $150,000 40,000 2,000 Bal. 32,000 Dr. Cr
II Double-entry SystemEach transaction has a dual effect on the equationAssetAnother assetLiabilityOwner's equity3AssetsLiabilitiesEquity
Ⅱ Double-entry System ◼ Each transaction has a dual effect on the equation. Assets Liabilities Equity ◼ Asset Another asset Liability Owner’s equity