Summary of Week 3
The three concepts that form the basis of double-entry accounting are the business entity concept, the accounting equation and the duality concept. The business entity concept means that a business is separate from the owner(s) of the business. The accounting equation for any business states that Assets = Capital + Liabilities. The duality concept means that every transaction has two effects.
The basic principle of double-entry accounting is for every transaction recorded there should be a debit entry and a credit entry in the relevant T-accounts according to the following double-entry rules:
Table 3 Rules of double entry revisited
|Account name||Effect of transaction||Debit||Credit|
You can now go to Week 4: Preparing the trial balance and the balance sheet.