Page 33 - Book-keeping for Secondary Schools Student’s Book Form One

Application of the double entry system

Chapter Three

Application of the double entry system
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Introduction

The use of the double entry system requires that every business transaction must be
recorded twice in the books of accounts. In this chapter, you will learn accounting
equation, statement of affairs and the concept of double entry. The competencies
developed will enable you to use double entry principles appropriately on posting
the business transactions in the books of accounts.

Think as electricity, water and repairs. The items
needed to start and operate this business
On the way in which the business (equipment, furniture, fittings, consumables
should keep record of the machine and cash) are called assets.
acquired and cash paid.
Assets are resources that an enterprise
controls and uses to conduct its business.
Accounting equation Also, they include goods kept for sale
The accounting equation shows resources or consumed in the process of providing
owned by a business against those due to services, which are called stock or

others. To understand this equation, think inventory.
of Habibu, who just started a barber shop Stock (inventory) are goods which
business on 1 January 2020. To start are held by the business for resale, or
st
this business, he rented a room, bought consumed in the process of providing
services. For a manufacturing firm,
equipment (shaving machines), furniture they may be finished goods, partly
(chairs and shelves), fittings (wall fittings finished goods or raw materials
and glasses), and consumables (soap, awaiting conversion or processing
creams and towels). He also had some into finished goods which will then
cash to pay day to day running costs such be sold.

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