Double Entry Aspects

Debit Credit
Date Detail Folio Amou Date Detail Foli Amount
nt o

When we make a debit entry we are either:

i. Increasing the value of an asset.
ii. Reducing the value of a liability.
iii. Reducing the value of capital.

When we make a credit entry we are either:

i. Reducing the value of an asset.
ii. Increasing the value of a liability.
iii. Increasing the value of capital.

From the figures below , calculate capital.

Assets Ksh Liabilities Ksh

Equipment 115,00 Creditors 39,500
0
Motor vehicle 62,900
Stock 61,500
Debtors 57,700
Cash at bank 72,800
Cash in hand 400
371,300

Capital = Ksh371,300 - Ksh39,500 = Ksh330,800

Write up the asset, capital and liability accounts in the books of Mantus Ltd to record the
following transactions: 2022
June 1 Started business with Ksh50,000 in the bank.
“ 2 Bought motor van paying by cheque Ksh12,000.
“ 5 Bought Fixtures Ksh4,000 on credit from Office Masters Ltd.
“ 8 Bought a van on credit from Motor Cars Ltd Ksh8,000.
“ 12 Took Ksh1,000 out of the bank and put it into the cash till.
“ 15 Bought Fixtures paying by cash Ksh600.
“ 19 Paid Motor Cars Ltd by cheque Ksh8000.
“ 21 A loan of Ksh10,000 cash is received from J Marcus.
“ 25 Paid Ksh8,000 of the cash in hand into the bank account.
“ 30 Bought more Fixtures paying by cheque Ksh3,000.

Capital a/c Cash at

bank a/c

2022 Ksh 2022 Ksh 2022 Ksh

2022 Ksh
30/6 Bal c/d 50,000 1/6 Bank 50,000 1/6 Capital 50,000
2/6 Van 12,000
12/6 Cash 8,000 12/6Cash
1,000
19/6Motor ltd
8,000
50,000 50,000 30/6 Fixtures 3,000
30/6 Bal c/d
34,000

58,000
58,000

Motor Van
2022 Ksh Ksh
2/6 Bank
12,000
8/6 Super M 30/6 Bal c/d
8,000 20,000

20000 20000

Fixtures
2022 Ksh 2022 Ksh
5/6 young
4,000
15/6 Cash
600
30/6 Bank Bal c/d 7,600
3000
7,600 7,600

Motor Car Ltd – Creditors

2022 Ksh 2022 Ksh
19/6 Bank 8/6 Van 8000
8000
8000 8000

Office Masters Ltd - Creditor

2022 Ksh 2022 Ksh
30/6 B\f 8/6 Fixtures 4000
4000
4000 4000
 Cash in hand
2022 Ksh 2022 Ksh
12/6 Cash 15/6 Cash
1,000 600
25/6 Bank 800
21/6 J. Marcus 10000 30/6 Bal c/d 2400
11000 11000

J. Marcus - Loaner
2022 Ksh 2022 Ksh
30/6 c\f 21/6 Cash 10000
10000

Note that the difference between the debit side and the credit side is the balancing figure.
Most assets will have a balance on the credit side and most liabilities and capital accounts
will have a balance on the debit side.
A simple balance sheet from these balances will be as follows:

Mantus Manenos Ltd

Balance Sheet as at 30th June 2022
Ksh Ksh
Non Current Assets
Fixtures 7,600
Motor vehicles 20,000
27,600
Current Assets
Cash at bank 34,000
Cash in hand 2,400
36,400
Current Liabilities
Creditors – others (4,000)
Net Current Assets 32,400
Net Assets 60,000

Capital 50,000
Non Current Liabilities
Loan – J Jarvis 10,000
60,000

Let us now consider other transactions that take place in a business and the accounting
entries to be made.

Accounting for sales, purchases, incomes and expenses.

Sales:
This is the sell of goods that were bought by a firm (the goods must have been bought
with the purpose of resale). Sales are divided into cash sales and credit sales.
When a cash sale is made, the following entries are to be made.
i. Debit cash either at bank or in hand.
ii. Credit sales account.

For a credit sale:

i. Debit debtors/ Accounts receivable account.
ii. Credit sales account.
A new account for sales is opened and credited with cash or credit sales.
Purchases:
Buying of goods meant for resale. Purchases can also be for cash or on credit. For cash
purchases:
i. Debit purchases.
ii. Credit cash at bank/cash in hand
For credit purchases, we:
i. Debit purchases.
ii. Credit creditors for goods.

A new account is also opened for purchases where both cash and credit purchases are
posted. NOTE: NO ENTRY IS MADE INTO THE STOCKS ACCOUNT.

Incomes:
A firm may have other incomes apart from that generated from trading (sales). Such
incomes include:
 Rent
 Bank interest
 Discounts received.
When the firm receives cash, from these incomes, the following entries are made:
 Debit cash in hand/at bank.
 Credit income account.
Each type of income should have its own account e.g. rent income, interest income.
Incomes increase the value of capital and that is the reason why they are posted on the
credit side of their respective accounts.

Expenses:
These are amounts paid out for services rendered other than those paid for purchases.
Examples include:
 Postage and stationery
 Salaries and wages
 Telephone bills
 Motor vehicle running expenses.
 Bank charges.
When a firm pays for an expense, we:
i. Debit the expense account.
ii. Credit cash at bank/in hand.
Each expense should also have its own account where the corresponding entry will be
posted. Expenses decrease the value of capital and thus the posting is made on the debit
side of their accounts.
Returns Inwards and Returns Outwards.
Returns Inwards: These are goods that have been returned by customers due to various
reasons e.g.
i. They may be defective/damaged,
ii. Being of the wrong type .
iii. Excess goods being delivered.
Goods returned may relate to cash sales or credit sales. For the goods returned in relation
to cash sales and cash is refunded to the customer the following entries are made:
i. Debit returns – inwards
ii. Credit cashbook.
For goods returned that relate to credit sales; no cash has been given to customer, the
following entry is to be made.
i. Debit returns inwards.
ii. Credit debtors.
Returns Outwards: These are goods returned to suppliers/creditors. They may be for
cash purchases or for credit purchases. For cash purchases a cash refund given to the
firm by the supplier,
i. Debit the cashbook (cash at bank/hand).
ii. Credit returns outwards.
For credit purchases and no refund has been made:
i. Debit creditors.
ii. Credit returns outwards.