CATEGORY OF ACCOUNTS

Purchases + Expenses + Assets = Revenue + Liabilities + Source of Investment

(Capital)

CATEGORY - Purchases - Expenses - Assets - Revenue - Liabilities - Source of Investment / Capital

DEBIT Increase Increase Increase Decrease Decrease Decrease

CREDIT Decrease Decrease Decrease Increase Increase Increase

TYPES OF BALANCES

DEBIT -

CREDIT -

Debtors Expenses Assets Losses

Creditors Liabilities Income Provisions Profits

BAD DEBTS

To transfer Bad Debts:

Dr Cr

Bad Debts a/c Debtors a/c or Accounts Receivables a/c

To close off Bad Debts:

Dr Cr

Profit & Loss a/c Bad Debts a/c

To recover Bad Debts:

Dr Cr Dr Cr Dr Cr

Debtors a/c or Accounts Receivables a/c Bad Debts Recovered a/c Cash or Bank a/c Debtors a/c or Accounts Receivables a/c Bad Debts Recovered a/c Profit & Loss a/c OR

Dr Cr Dr Cr

Cash or Bank a/c Bad Debts Recovered a/c Bad Debts Recovered a/c Profit & Loss a/c

To Provide for Bad Debts: (First year; full amount)

Dr Cr Dr

Profit & Loss a/c Bad Debts Provision a/c Profit & Loss a/c Bad Debts Provision a/c Bad Debts Provision a/c Profit & Loss a/c

(Second year; to increase) Cr Dr (Third year; to decrease) Cr

DEPRECIATION

To charge for depreciation: Dr Cr

Depreciation Expense a/c Provision for Depreciation a/c

To close of depreciation:

Dr Cr

Profit & Loss a/c Depreciation Expense a/c

Straight Line Method:

Annual Depreciation = Cost of Machine Scrap Value Useful Life of Asset

(Increase in Useful Life):

New Ann. Dep. = Written Down Value Scrap Value Remaining Useful Life of Asset

Reducing Balance Method: r = 1 ns/c

DISPOSAL OF FIXED ASSETS

To remove the cost of the asset:

Dr Cr

Disposal a/c Fixed Asset a/c

To remove the Acc. Depr.:

Dr Cr

Provision for Depreciation a/c Disposal a/c

To record sale of asset:

Dr Cr

Bank / Cash / Other Debtors a/c Disposal a/c

EXCHANGES

To remove the cost of old asset:

Dr Cr

Disposal a/c Fixed Asset /ac

To remove the Acc. Depr.:

Dr Cr

Provision for Depreciation a/c Disposal a/c

To record cost of new asset:

Dr Cr

Fixed Asset a/c Disposal a/c

To record money paid:

Dr Cr

Disposal a/c Bank / Cash a/c

MARK-UP

Cost Price Cost Price

+ +

Profit

Sales Price = Sales Price

% of Cost Price

Mark-up is expressed as a proportion of Cost Price. Cost Price + Mark-up = Sales Price

MARGIN

Sales Price Sales Price

Profit

Cost Price = Cost Price

% of Sales Price

Margin is expressed as a proportion of Sales Price. Sales Price Margin = Cost Price

GOODS SENT ON SALE / RETURN BASIS

When goods are sent : (sale price of goods)

Dr Cr

Debtors a/c Sales a/c

When goods remain unsold: (sale price of goods remaining)

Dr Cr

Sales a/c Debtor a/c

COMMISSION

As a percentage of Net Profit:

Commission = Net Profit

Commission %

Commission =

Commission %

Net Profit

As a percentage of NP (after commission paid)

Commission =

r 100% + r

NP

where

rate

DRAWINGS

When owner withdraws money:

Dr Cr

Drawings a/c Cash / Bank a/c

When owner withdraws goods:

Dr Cr

Drawings a/c Purchases a/c

TRADING ACCOUNT

Total Sales - Less: Sales Returns / Returns Inward Net Sales Less: Cost of Sales Opening Stock - Purchases - Less Purchases Returns / Returns Outward ----------------------------Carriage Inward Net Purchases - Cost of Goods Available for Sale - Less: Closing Stock Cost of Goods Sold Gross Profit ----------------------------------------------------------------------------------------

------------------------------------------

-------------------------------

PROFIT & LOSS ACCOUNT

Gross Profit Rent Received (Prepayment)

----------------------------------------------

Less operating expenses: - Bad Debts - Bank Charges - Carriage Outward - Depreciation - Electricity - Insurance - Salaries & Wages - Telephone - Water Rates Net Profit ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

BALANCE SHEET

Fixed Assets: - Building - Furniture - Less: Prov. for Depreciation - Motor Vehicle - Less: Prov. for Depreciation -------------------------------------------------------------------------------Current Assets: - Stock - Debtors - Accrued Income - Prepaid Expense - Bank - Cash -------------------------------------------------------------------------------------------------------Less Current Liabilities: - Loan - Creditors - Prepaid Income - Accrued Expense ---------------------------------------------------------------------------Net Current Assets -------------------------------------------------------------

Financed By: - Capital - Add Net Profit ----------------------------------------------Add Long-term Liabilities: - Mortgage - Loan -------------------------------------------------------------