DOUBLE ENTRY BOOKKEEPING-PART 2

STEPS TO RECORD A BANK TRANSACTION

• Cash transaction involved cash account
• Bank transaction = use of cheques = bank account + destination account
• Underline the two words, and write the name of the account involved on top of them
• Example - read the following and underline the key terms:
• Paid motor expenses by cheque $2000

MAIN BANK TRANSACTION COME IN THE FORM OF

• Goods purchased for resale
• Purchase of non current asset
• Goods sold and banked money
• Expenses paid by cheque

LET US TAKE AN EXAMPLE

• Purchased goods by cheque $4000
• Please identify the two accounts involved
• Once two accounts(due to double entry) have been identified, see if cheque is received or paid.
• Receipts by cheque = debit bank account
• Payments by cheque = credit bank account

PURCHASED GOODS BY CHEQUE $5000

• Is it cheque received or paid?
• out = credit
• …………out = credit ………….account
• So, what is the double entry here?
• Account debited =
• Account credited =

BOUGHT OFFICE FURNITURE BY CHEQUE $1300

• Again, is it cash,bank or credit transaction?
• ………………..
• Which account involved?
• ………………
• Cheque received or paid?
• ………………
• Double entry is ;
• Account debited =
• Account credited =

MAIN DIFFERENCE BETWEEN A CASH ACCOUNT AND BANK ACCOUNT

BANK ACCOUNT= EITHER DEBIT BALANCE OR CREDIT BALANCE POSSIBLE