Page 45 - Book-keeping for Secondary Schools Student’s Book Form One

Application of the double entry system

The application of the double entry system can be established from the two transactions
above given on page 36:
1. In transaction 1: the corresponding entry for the debit of TZS 25,000 made in
electricity expense account is the credit entry made in the cash account.

2. In transaction 2: the corresponding entry for the debit of TZS 20,000 made in
FOR ONLINE READING ONLY
cash account is the credit entry made in service revenue account.

Steps to be followed when identifying and posting transactions in the ledger
accounts:

Step 1: In each transaction, a student or book-keeper must identify two accounts
involved in the transaction.
Step 2: Find out the element to which each of the accounts involved belong that
whether it belongs to assets, liabilities, capital, revenue or expenses.

Step 3: Indicate the effect of transaction that is, increase or decrease of the account
Step 4: Debit and credit appropriate ledger accounts by applying the rules of double
entry.

Example 3.2
For each of the following transactions below, identify two accounts involved, their
types, and state which account should be debited and which one should be credited.

2020 1 Diana started a business by depositing TZS 2,000,000 capital in the
January bank account.
4 Bought machinery worth TZS 200,000 on credit from Alpha.
8 Purchased goods worth TZS 400,000 on credit from Julius.
12 Sold goods for cash TZS 150,000.
16 Withdrew TZS 200,000 from the bank account for business use.
20 Sold goods on credit to Tandahimba Ltd. TZS 50,000.
22 Returned goods worth TZS 15,000 to Julius because they were of
the wrong type.
24 Paid wages in cash TZS 30,000.
26 Withdrew TZS 100,000 from the bank account for personal use.
27 Purchased goods from Frida worth TZS 150,000 promising to pay
for them later.
28 Tandahimba Ltd. returned goods worth TZS 5,000 because they
had expired.
29 Received rent in terms of cash TZS 50,000.

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