Double Entry Book

Double entry book – keeping
Double entry book keeping is the process of making a debit entry and a credit
entry for each transaction. The term double entry is used because the two effects
of a transaction (a giving and a receiving) are both recorded in the ledger.
The layout of a ledger account is as follows.

Account name
Debit credit
Date Details $ Date Details $
Activity 1
2017
January 1: Ajay began business. He opened a business bank account and
invested $ 80000 as capital.
January 2: Fixtures and equipment costing $30000 were bought and paid by
cheque.
January 3: A short term loan of $10000 was received from AB Loans.
January 5: A motor vehicle costing $9000 was bought and paid for by cheque.
January 6: A long term loan of $5000 was received from Ajay’s sister Mallika
January 7: He paid motor expenses, $50 by cheque.
January 7: Rent received by cheque amounted to $ 95.
Enter these transactions in Ajay’s ledger.
Activity 2
For each of the following transactions, state the name of the account which will
be debited and the name of the account which will be credited.
a. Paid rates by cheque
b. Bought machinery and paid by cheque
c. Received commission by cheque for work done for another business
d. Repaid by cheque, money borrowed from XYZ Loan Co
Drawings
When the owner of a business takes value from the business for his/her own use
this is known as drawings. This value may be in the form of money, non-current
assets or goods from the inventory held by the business.
Drawings account Debit
Cash/bank/purchases account Credit
Activity 3
For each of the following transactions, state the name of the account which will
be debited and the name of the account which will be credited.
a. The owner of a business invested more money in the business.
b. The owner of a business took an unused motor vehicle for personal use.
c. The owner of a business took goods for personal use.
Double entry records for sales, purchases and returns

Purchases
a. Goods purchased for cash or cheque
Purchases account Debit
Cash/Bank account Credit
b. Goods purchased on credit

Purchases account Debit
Trade creditor’s/Trade payable’s account Credit
Activity 4
2017
January 9: Ajay bought goods, $650 on credit from Kolkata &Co
January 10: Ajay bought goods, and paid by cheque.
January 13: Ajay paid the amount owing to Kolkata & Co by cheque
Sales
a. Goods sold for cash or cheque
Cash/Bank account Debit
Sales account Credit
b. Goods sold on credit

Trade debtor’s /Trade receivables account Debit
Sales account Credit
Activity 5
2017
January 16: Ajay sold goods, $175 for cash
January 17: Ajay sold goods, $770 on credit to Padma
January 20: Padma gave Ajay a cheque for $500 on account
Returns
Sometimes goods which have been purchased have to be returned to the
supplier. They may be faulty, damaged or not what was ordered. These goods
are known as purchase returns or returns outward.
Trade creditor’s A/C Debit
Purchases returns A/C Credit
Similarly, a customer may return goods to the business. These goods are known
as sales returns or returns inwards.
Sales returns A/C Debit
Trade debtor’s A/C Credit
Activity 6
2017
January 21: Ajay sold goods, $245 on credit to Xavier Traders
January 22: Xavier Traders returned damaged goods, $55 to Ajay
January 23: Ajay purchased goods, $820 on credit from Varun
January 25: Xavier Traders paid their account by cheque
January 27: Ajay returned faulty goods, $ 44 to Varun
January 30: Ajay gave Varun a cheque for $ 700 on account
Double entry records for carriage inwards and carriage outwards

The term carriage refers to the cost of carrying or transporting goods. Carriage
inwards is part of the cost of purchasing goods as it occurs when a business has
to pay for goods it has purchased to be delivered to its premises.
Carriage outwards is a selling expense as it occurs when a business pays for
goods to be delivered to the customer’s premises.
Both are expenses to the business and should be treated separately in the
accounts.
Carriage inwards A/C Debit
Cash/Bank A/C Credit
Carriage outwards A/C Debit

Cash/Bank A/C Credit

Double Entry Book

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Double entry book – keeping

The layout of a ledger account is as follows.

Double entry records for sales, purchases and returns

b. Goods purchased on credit

b. Goods sold on credit

Double entry records for carriage inwards and carriage outwards

Carriage outwards A/C Debit

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