ACCUNTING STEPSTEP THE LANGUAGE OF DEBIT AND CREDIT …一步的借方与贷方会计步语言…

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1、1ACCOUNTING STEP BY STEPTHE LANGUAGE OF DEBIT AND CREDITDr. R.G.A. Boland FCA, CPA, DBABRIEF LECTURES TO REINFORCE THE KEY PROGRAM LEARNING ACTIVITY- LEARNING BY DOING! 2 CHAPTER I - INTRODUCTION TO BOOKKEEPING In 2006 all the hard work of bookkeeping is now done by computer. But . We must understan

2、d the language of debit and credit, so that we can use the computer data to produce RELIABLE accounting reports in accordance with IAS (International Accounting Standards).3No matter what the form of the record, the basic rule of bookkeeping remains the same: the concept of debit and credit.The five

3、 key steps are .Book-keeping and AccountingThe process of book-keeping and accounting may be summarized into the following five steps: A. BOOK-KEEPING 4A. BOOKKEEPING: I. Translate transactions into debits and credits in a journal. 2. Post the debits and credits to ledger accounts.3. Balance the led

4、ger accounts to summarize the net effect of the entries.4. Extract a trial balance to check the arithmetical accuracy of the postings. 5B. ACCOUNTING5. From the trial balance prepare the accounting reports, balance sheet and income statement (profit and loss account) with IAS!Accounting LanguageAcco

5、unting has been called the language of business. Like any language, it can never express our thoughts with absolute precision and clarity. 6Our task of learning this language is complicated by the fact that many of the words used in accounting mean almost, but not quite, the same as they mean in eve

6、ry-day life. We must learn to think of words in their accounting rather than their popular meaning. In this program, we have used a standard set of English and American accounting terms, although certain other terms are also of accounting terms reinforces your basic grasp of the language. 7 Accounti

7、ng PeriodThe basis of all profit is the period (accounting period) during which the profit is realized. Thus $10 a week is not the same as $10 for a whole year. Again, the financial position of a business must relate to a particular date. Thus the picture at January 1st may not be the same as the pi

8、cture at June 3oth. Therefore, the accounting period and the date, is vital information which affect the significance of the accounting reports.8A glossary of common bookkeeping words is provided at the end of the program.The following list indicates some of the major differences between English and

9、 American terminology: 9 English Term American TermDebtors Accounts receivable Creditors Accounts payable Stock of goods InventoryShare capital Capital stockProfit IncomeAccumulated profits Retained earnings Profit and loss account Income statement Debit & Credit 10 Some textbooks teach the applicat

10、ion of debit and credit as: (a) Credit the giver (b) Debit the receiver 11 However this has certain logical limitations. So, in this program we use a different approach. We first define:(a) Debit, as the left-hand side(b) Credit, as the right-hand side(c) Basic debits as, assets, costs and expenses(

11、d) Basic credits, as liabilities, owners equity and sales This facilitates very rapid assimilation of the bookkeeping technique, while the computer does all the hard work! 12 CHAP TER II - ACCOUNTING REPORTSSET I - INCOME STATEMENT (PROFIT AND LOSS ACCOUNT) SUMMARYThe income statement (profit and lo

12、ss account) of a business relates to a specific accounting period. It matches sales against cost of ales and expenses, to compute a figure of profit for the accounting period.Profit realized is NOT the same as cash received.Cash is more important than profit!13Sales, less cost of sales and less expe

13、nses, equals profit.Sales equals cost of sales, plus expenses, plus profit.14IMPORTANT NOTEIn the front of each set is a summary (as above) of technical terms and ideas to be learned from the set. Read it quickly.If you already understand all of the summary do not complete the set, pass on to the ne

14、xt one.If you do not completely understand every technical term and idea in the summary, do the whole set. Do not attempt to do only parts of a particular set. 15CHAPTER II SET 2 - BALANCE SHEET SUMMARYThe balance sheet presents a financial picture of a business and lists the assets, liabilities and

15、 owners equity of the business at a specific date. It is not the same as an income statement.Valuable things owned by a business such as cash, debtors, inventory (stock), prepaid expenses and car are assets. Creditors are liabilities.16The owners equity is the original investment of the owners (shar

16、e capital) in the business plus the profits earned and left to accumulate in the business.17Assets are generally recorded at cost or lower and NOT at higher resale prices - very conservative!.18Assets less liabilities equals owners equity or net worth.Assets equals liabilities plus owners equity. 19

17、Note. (a)In our balance sheets we shall (for bookkeeping) always record assets on he left side, and liabilities and owners equity on the right side.Note: In some countries they may present the balance sheet in many different ways . but in bookkeeping . debit (left) and credit (right) are always the

18、same. hooray! 20(b) Remember: Debtors are receivables Creditors are payables Stock is inventory Accumulated profit is retained earnings Profit is income21CHAPTER II - SET 3 - BUSINESS TRANSACTIONSTransactions may be for cash or for credit. In a credit transaction liability is incurred but cash is tr

19、ansferred later as a separate transaction.All transactions have a dual aspect (debit & credit) and thereby affect two items on the balance sheet. 22Accounting conventions recognize transactions at particular times. For example:Sales transactions are generally recognized when the goods leave the sell

20、ers premises, whereas Purchase transactions arc normally recognized when the goods are received by the buyer.1. An instantaneous financial picture of a business as of a particular date is a.income statementb.statement of accumulated profitc.balance sheetd.profit and loss accountC2. An accounting rep

21、ort of the flows of sales, costs, expenses and net profit over an accounting period is called a: a.sales reportb.balance sheetc.income statementd.owners equityC3. In a balance sheet the assets are exactly equal to the:a.liability to creditorsb.owners equityc.current assetsd.claims against the assets

22、D4.Owners claims against the assets of a business are called: a. liabilities b. capital stock c. owners equity d. incomeC5.Valuable things owned by a business are called:a.capitalb.assetsc.fixed assetsd.liabilitiesB6.Assets less liabilities equals:a.share capitalb.accumulated profitsc.owners equityd

23、.salesC7.People who owe debts to a business are listed on a balance sheet of that business as:a.trade creditorsb.incomec.claims against the assetsd.debtorsD8.Land, building, etc., owned by a manufacturing business is a:a.current assetb.other assetc.fixed assetd.capitalC9.Stock is a:a.fixed assetb.pa

24、rt of owners equityc.assetd.claim which the business agrees to payC10. The owners equity of a limited company consists of:a.share capital and accumulated profitsb.share capitalc.assetsd.dividendsA11. Assets less owners equity equals:a.claims of the shareholdersb.current liabilitiesc.capitald.liabili

25、tiesA.12. If a business has cash of 2,000, trade creditors of 100, a mortgage payable of 5,000 and land of 10,000 the owners equity is:a.impossible to computeb.10,000c.5,100d.6,900D13. A balance sheet is prepared for a business entity. For a limited company this entity is:a.the company and its manag

26、ementb.the company and its shareholdersc.the shareholders aloned.the company aloneBB 22. Which of the following are basic debits?a.liabilitiesb.fixed assetsc.owners equityd.share capital 23CHAPTER III - BOOK-KEEPING TECHNIQUESET 4 - DEBIT AND CREDIT SUMMARYDebit means left-hand side. Credit means ri

27、ght-hand side. In bookkeeping debit and credit have NO significance as being good or bad as is implied by the popular use of the same words. 24Each item in the balance sheet and income statement is, by convention, either a basic debit or a basic credit: 1. The items on the left-hand side: assets, co

28、sts and expenses are basic debits. 2. The items on the right-hand side: liabilities and owners equity and sales are basic credits. 25A basic debit is increased by debits and decreased by credits. Conversely a basic credit is increased by credits and decreased by debits.Each business transaction has

29、a debit aspect and a credit aspect of the same amount. Thus in a set of books the total debits always equal the total credits.Dr means debit. Cr means credit.26IMPORTANT NOTEAt this point we must unlearn something about the words debit and credit, which is current in every-day life but does NOT appl

30、y to bookkeeping!Repeat aloud the following sentences:Credit means right side, It does not mean good or bad. Debit means left side. It does not mean good or bad.28 CHAPTER III SET 5 ACCOUNTS AND BALANCESUMMARYFor each basic debit item and each basic credit item in the accounting reports there is an

31、account in the books of the business. An account is simply a page in the books. In a series of accounts in the books we analyze and summarize each aspect (Dr and Cr) of a large number of business transactions.29The balance brought down summarizes the net amount of the transactions recorded in the ac

32、count to date. Each account may have a debit or credit balance according to the net total of debit and credit postings. 30CHAPTER III SET 6 - CASH AND CREDIT SUMMARYIn bookkeeping the word credit has two meanings: Credit means NOT for cash Credit means right side of the account, the opposite of debi

33、t. 31Transactions may be either for cash or credit Cash transactions are either cash receipts or cash payments, which increase or decrease the cash balance.Credit transactions increase either receivables or payables, but NOT cash . until they are paid with a cash transaction!. 32Cash is an asset and

34、 therefore a basic debit. 33In terms of debit and credit, cash sales and purchases are recorded thus:Cash receipts: Cash account Dr. Sales account Cr.Cash payments:. Purchases account Dr. Cash account Cr 34Credit transactions do not affect the balance of cash but they do increase debtors (basic debi

35、ts) or creditors (basic credits). Remember - debtors - receivables - basic assetCreditors - payables - basic credit 35Credit transactions for sales and purchases are recorded thus:Credit sales: Debtor (receivable) account Dr. Sales account Cr Credit purchases: Purchases account Dr Creditor account C

36、r. 36CHAPTER III SET 7 - JOURNALIZING TRANSACTIONS SUMMARYThis is a revision set to give you practice in journalizing transactions by translating them into debits and credits.The journal of a business is the book in which any transaction may be recorded in the following form of entry. 37FORM OF GENE

37、RAL JOURNAL ENTRY:DateAccount name Dr 1000 Account name Cr 1000Plus an explanation of the transaction for future reference. 22. Which of the following are basic debits?a.liabilitiesb.fixed assetsc.owners equityd.share capitalB 23. Which of the following are basic credits?a.assetsb.costsc.owners equi

38、tyd.expensesC 24. A debit balance is increased by a:a.creditb.debitc.something elsed.both credits and debitsB25. A basic debit is decreased by a:a.creditb.debitc.neitherd.both debits and creditsA26. A basic credit is decreased by a:a.debitb.creditc.neitherd.both debits and creditsA 27. Debtors are d

39、ecreased by:a.debitsb.creditsc.something elsed.both debits and creditsB 28. Expenses are increased by:a.debitsb.creditsc.something elsed.both debits and creditsA29. Sales are increased by:a.debitsb.creditsc.something elsed.both debits and creditsB37. Creditors normally have a balance:a.debitb.credit

40、c.something elsed.debit or creditB38. Debtors normally have abalance:a.debitb.creditc.something elsed.both debit and creditA39. Owners equity and profits normally have a balance:a.debitb.creditc.something elsed.both debit and creditB40. Expenses and sales normally have balance which are:a.the same-d

41、ebitb.the same-creditc.credit and debit respectivelyd.debit and credit respectivelyD41. Assets normally have abalance:a.debitb.creditc.something elsed.both debit and creditAC42. Posting in book-keeping means:a.writing in the journalb.journalizingc.writing in the ledger accountsd.preparing a trial ba

42、lance 38 CHAPTER IV - SPECIAL TRANSACTIONSSET 8 ACCRUALS SUMMARYAccruals are credit transactions. They record a liability not yet paid for. The liability may be for the purchase of a fixed asset, or a cost or an expense incurred. Thus the books and the accounting reports must show the full liabiliti

43、es of a business. Settlement of the accrual in cash, is a subsequent cash transaction. 39To record an accrual we journalize: Asset (basic debit Dr. Creditor (basic credit) Cr. OR Cost (basic debit) Dr. Creditor (basic credit) Cr. OR Expense (basic debit) Dr. Creditor (basic credit) Cr. 40To record t

44、he cash settlement of the accrual we journalize: Creditor (basic credit) - decreased Dr. Cash (basic debit) - decreased Cr. 41CHAPTER IV SET 9 - FIXED ASSETS AND DEPRECIATION SUMMARYFixed assets, such as land, buildings, machinery, plant, furniture, trucks, cars, etc., are normally purchased for use

45、 in the business, and not for resale.The process of depreciation allocates the cost of each fixed asset to depreciation expense proportionally over its working life. It is a process of allocation not valuation of the fixed asset, Depreciation expense (basic debit) is shown in the income statement.42

46、Fixed assets (basic debits) are shown in the balance sheet at cost, less accumulated depreciation (basic credit). Exception: Land is not depreciated - shown at cost until revalued. 43The amount charged to depreciation expense for the accounting period may be journalized in one of two ways:I.Directly

47、 against the cost of the fixed asset: Depreciation expense (basic debit) Dr Fixed asset (basic debit) Cr OR 44 2.Through an intermediate account deducted from the cost of the fixed asset in the balance sheet: Depreciation expense (basic debit) Dr Accumulated depreciation (basic credit) Cr.Note: Accu

48、mulated depreciation is deducted from the total of fixed assets (basic debits) on the left side of the balance sheet. It is therefore a basic credit (not basic debit).44. A cash payment is journalized:a.debit cash, credit some other accountb.debit some other account, credit debtorsc.debit cash, cred

49、it creditorsd.credit cash, debit some other accountD45. Cash receipts are always journalized as debit to:a.debtorsb.creditorsc.owners equityd.something elseD46. Credit sales are journalized:a.credit debtors, debit salesb.debit cash, credit salesc.debit creditors, credit salesd.debit debtors, credit

50、salesD47. A cash purchase is always recorded as a credit to:a.creditorsb.assetsc.cashd.purchasesC49. Receipt from a debtor is journalized as:a.debit sales, credit cashb.debit debtors, credit cashc.debit debtors, credit salesd.debit cash, credit debtorsD50. A credit transaction is normally followed b

51、y a cash transaction:a.trueb.falsec.neitherd.bothA51. Cash is a basic:a.debitb.creditc.neitherd.debit or creditA52. In the cash account cash receipts are:a.debitsb.creditsc.neitherd.both debits and creditsA53. In the cash account cash payments are:a.debitsb.creditsc.neitherd.both debits and creditsB

52、54. Debtors are:a.debitsb.creditsc.neitherd.both debits and creditsA55. A debit balance on a creditors account probably means:a.we owe him moneyb.he owes us moneyc.something elsed.there is an error or a return to supplier.B/D56. Purchase of land on credit is recorded:a.debit purchases, credit cashb.

53、debit cash, credit landc.debit land, credit creditorsd.something elseC57. Purchase of machinery for cash is recorded:a.debit cash, credit machineryb.debit debtors, credit machineryc.credit cash, debit machineryd.something elseCD58. Payment of rent in cash is recorded:a.debit rent, credit creditorsb.

54、credit rent, debit cashc.debit rent, credit debtorsd.something else 45CHAPTER V RECORDSSET 10 - JOURNALS AND LEDGERS SUMMARYBooks of account may be divided into books of. Prime entry (journals) Second entry (ledgers) 46In the journal each transaction is translated into debits and credits, Only one j

55、ournal is essential but in practice we have separate journals for each main source of transactions. 47 The cash book (journal) records cash receipts and payments. The sales journal records credit sales. The purchases journal records credit purchases. The general journal records all types of transact

56、ions48The sales journal and the purchases journal summarize one side of transactions so that the debit to purchases and the credit to sales may be made in total figures, instead of in detail for each transaction. 49Posting to the ledger accounts is made from the journals. Each ledger includes a seri

57、es of accounts to record the debit and credit aspects of the transactions. 50Three separate ledgers are usually kept. The sales ledger contains an account for each debtor. The purchases ledger contains an account for each creditor, In the general (private) ledger are all the other accounts for asset

58、s, liabilities, owners equity, sales, costs and expenses 51 CHAPTER V - SET 11 - TRIAL BALANCE SUMMARYBookkeeping is the process of keeping books of account. The bookkeeping records analyze, classify and summarize transactions to provide the basic data for accounting reports.In the books the total d

59、ebit postings equals the total credits.The arithmetical accuracy of the books is verified by making a trial or test by listing the balances of the accounts in the form of a trial balance, to check that total debits and credits agree.66. Depreciation expense is a basic credit. This statement is:a.tru

60、eb.falsec.eitherd.neitherB67. Accumulated depreciation is:a.an expenseb.a liabilityc.a fixed assetd.deducted from fixed assetsD68. Depreciation is a process of:a.allocationb.valuation of fixed assetsc.accruald.salesA69. Bad debt expense is recorded:a.debit debtors, credit bad debtsb.debit creditors,

61、 credit bad debtsc.debit bad debt expense, credit debtorsd.something elseC70. Debit cash, credit machinery normally records:a.purchase of fixed assetb.prepaid expensesc.sale of a debtord.something elseD71. Transactions are first translated in debits and credits in the:a.ledgerb.journalc.cash bookd.s

62、omething elseB/C72. The three types of ledgers are normally:a.sales, purchases, assetsb.sales, general, purchasesc.cash book, sales, purchasesd.purchases, sales, expensesB73. The four types of journals are normally:a.cash book, sales, expenses, generalb.sales, cash, purchases, generalc.general ledge

63、r, sales and purchasesd.something elseB74. The arithmetical accuracy of the book-keeping is verified in the:a.booksb. balance sheetc.trial balanced.journalC75. An error of the right amount posted to the wrong account is ALWAYS revealed by the trial balance. This is:a.trueb.falsec.neitherd.partly tru

64、eB76. An error of the right amount posted to the wrong account is SOMETIMES revealed by the trial balance. This is:a.trueb.falsec.neitherd.partly trueA77. The original entry of a transaction to charge depreciation would be recorded first in the:a.Sales ledgerb.Sales journalc.General journald.Private

65、 ledgerC78. The process of book-keeping alone involves:a.journalizing, postingb.journalizing, posting, balancingc.journalizing, posting, balancing, trial balanced.journalizing, posting, balancing, trial balance, balance sheet, income statementCD79. We prepare accounting reports normally from a:a.led

66、gerb.balance sheetc.journald.trial balance 52CHAPTER VI - SET 12 SUMMARYThis is a revision set on the whole process of BOOKKEEPING and accounting which involves: Journalizing transactions into debits and credits Posting to accounts in the ledger Balancing ledger accounts Extracting a trial balanceand . the ACCOUNTING work of preparing an income statement and a balance sheet with IAS!.53The set includes the routine for recording the following types of transactions:Starting a business with cashPur