BUSINESS STUDIES JSS1 THIRD TERM LESSON NOTE
Double Entry Book-keeping
Journals; Ledgers; Classification of Accounts
Introduction to Keyboarding
Parts of a Computer Keyboard
Care of the Computer; Correct Keyboarding Techniques
Home Row Keys (Keyboarding Applications)
Alphanumeric Keys (Keyboarding Applications)
Basic Service Keys (Keyboarding Applications)
Correct Spacing and Punctuation Marks (Keyboarding Applications)
Business Studies Upper Basic 7 Third Term Examination (Mock)
DOUBLE ENTRY BOOK-KEEPING
- Meaning of Double Entry Book-keeping
- Double Entry Treatment of Assets
- Double Entry Treatment of Liability
- Double Entry Treatment of Expenses
Meaning of Double Entry Book-keeping
Double entry book-keeping means that every debit entry must have a corresponding credit entry. This is a principle or rule that is followed globally in book-keeping system.
The fundamental concept of accounting is that every business transaction in money or money-worth has two effects: the receipts of a benefit by one account and the giving of a like benefit by another account. Thus, if a value is given, it is also received. The meaning of this is that where there is a giver, there is also a receiver who is called a debtor. The first Golden Rule of bookkeeping therefore states that, you debit the receiver and credit the giver.
In the process of debiting the account receiving the value and crediting the account surrendering the value, you end up recording every transaction twice, once as a debit entry and again as a credit entry. In effect, every credit entry must have a corresponding debit entry, and every debit must have a corresponding credit entry.
The double entry system divides the page into two halves as shown above. Every business that is established must have assets, liabilities, and capital
An Asset is anything of value that is owned by a business. A liability is an amount owed by a business to others, while Capital is the total investment in a business.
Therefore, an account is opened for every asset owned by a business and every liability owed by the business. Each account has a separate title and page given to it.
Double Entry Treatment of Asset
Example: Olundi, a wood seller, started business on January 1 with ₦5000 in cash. He purchased the following to enable him run the business.
Jan 9. He bought furniture from Londa & Co. Ltd. For ₦2000 in cash
Jan 12. He bought office equipment from Banuna & Co. Ltd. For ₦1000.
Jan 1. B. Olundi started business with ₦5000 cash as capital. With this introduction of ₦5000 into the business, two accounts should be opened. The capital account gave the money and should be credited, while the cash account received the money and should be debited.
Jan 9. On the purchase of furniture from Londa & Co. Ltd. For cash, the cash account will be credited because the account gave out the money, while the furniture Account will be debited for receiving the value of ₦2000.
Jan 12. He purchased office equipment from Banuna & Co. Ltd. The office account will be debited for receiving the value of ₦1000 while the cash account will be credited for giving the money.
|Jan 1. To capital a/c 5000.00||Jan 9. Furniture 2000.00|
|Jan 10.Office equipment a/c 1000.00|
|31 Balance c/d 2000.00|
|Feb 1. 2000.00|
|Jan1. To cash a/c
|Jan 1. To cash a/c
Office Equipment Account
|Jan. 12 to cash a/c
Double Entry Treatment of Liabilities
Liabilities are debts owed by a business to others. For example, if Mr. Akinola sells goods to Mr. Adewale worth ₦10,000 on credit. Mr. Akinola must keep a record to show that there is some money due from Mr. Adewale. Credit transactions involve the opening of a Personal Account. A personal account is an account that bears the name of the customer or a supplier.
January 10 Bought on credit from Amadu Electronics Company, an electric Cooker worth ₦10,000
January 24 Sold on credit goods worth ₦25,000 to B. Solape
The two accounts will be opened for the credit transactions as follows:
Amadu Electronics Company Account
|Jan. 10 Purchases
|Jan. 10 Purchases
|Jan. 10 Amadu Electronics Company
|Jan. 31 Balance c/d
- Solape Account
|Jan. 24 Sales
|Jan. 31 Balance c/d
|Jan. 24 B. Solape
Double Entry Treatment of Expenses
Meaning of Expenses
Expenses mean spending money belonging to a business to gain more money. It is recorded on the debit side of the books.
Types of Expenses
Rent, wages/salaries, postages, stationery, insurance telephone, electricity, motor expenses, etc.
June 12 Vehicle expenses of ₦2000 paid by cheque.
Credit Bank account, and debit Vehicle expenses account.
|Jan. 10 Vehicle expenses
|June 12 Bank
- What is Double Entry in Book-Keeping?
- Show the accounts to be debited and those to be credited in the following cases:
(i) Paid rent by cheque
(ii) Paid wages by cash
(iii) General expenses by cash
- Enter the following transactions in the appropriate accounts in double entry form and show the balance as of 10th June.
|June 1||Started business with ₦200,000.00 in cash|
|June 3||A. Amadi loaned the business ₦50,000.00 and remitted the money by cash|
|June 5||Bought goods for resale on credit for ₦150,000 from B. Balogun|
|June 7||Bought bicycle for the use of the company and paid by cash ₦15,000.00|
|June 8||Cash sales ₦20,000.00|
|June 10||Paid wages in cash ₦25,000.00|
DOUBLE ENTRY BOOK-KEEPING
- Meaning of Journals
- Meaning of Ledgers
- Classes of Ledger
- Classification of Accounts
Meaning of Journals
Journals are documents which contain the daily records of business transactions. Information from source documents are first recorded in journals before being transferred to the principal books of account. Journals are called day books because they need to be updated daily. Each record in a journal is called an entry. Journals are also called books of original entry or books of prime entry because the entries are transferred to a second book i.e. principal book of account.
Meaning of Ledgers
Ledgers are principal books of account used to record the weekly and monthly transactions from the journal entries. It is therefore called a book of second or secondary entry because transactions are transferred from the journal entries to it.
Classes of Ledger
The following are the classes of ledger we have:
(i) Sales Ledger: This contains a separate account for each individual to whom goods have been sold, or for whom services have been performed on credit. It is also called Debtor’s Ledger.
(ii) Purchases Ledger: This contains the personal accounts of those who have supplied goods or rendered services to the business on credit.
(iii) General Ledger: It is a ledger in which real and nominal accounts are kept.
(iv) Private Ledger: This is a confidential ledger kept by either the proprietor (owner of the business) or the Accountant outside the reach of the other staff.
(v) Loose-leaf ledger: This consists of separate sheets printed in ledger ruling.
(vi) Card Ledger: This consists of a printed card for each customer or supplier as appropriate. The cards are arranged in an orderly manner and filed in a special cabinet.