The Accounts of the General Ledger BALANCE SHEET

The Accounts of the General Ledger BALANCE SHEET SECTION CAPITAL CREDIT (CR) + DEBIT (DR) + DRAWINGS + ASSETS - - LIABILITIES + NOMINAL SECTION - INCOME + EXPENSES Wamark Publishers © +

Transaction: Receive cash for rendering a service i. e. Current Income R 1 000 Assets Income Expense + + + Effect on Accounting Equation DR Bank (A) CR Current Income 1 000 DR Current Income(I) CR Bank 1 000 Bank is an Asset which increases. Current Income is an Income which always increases Owner’s Equity. A + 1 000 = O/E = + 1000 + L Examples of businesses that provide services include hairdressers, doctors, babysitters, DJ’s, a carwash etc. Wamark Publishers ©

Transaction: Cash payments for Expenses e. g. stationery R 100 Assets Income Expense + + + DR Bank (A) CR Stationery 100 DR Bank Stationery (E) CR 100 Effect on Accounting Equation Bank is an Asset which decreases. Stationery is an expense which always decreases Owner’s Equity. A = -100 = O/E - 100 + L More examples of expenses : Fuel, salaries, wages, material costs. Packaging material, repairs, electricity, telephone, internet Wamark Publishers ©

Transaction: Cash payments for Assets e. g. Shoes to trade with R 150 (Cost Price) Assets + DR Income + 150 DR Trading Inventory(A) CR Bank 150 + Effect on Accounting Equation Bank (A) CR Trading Inventory Expense Bank is an Asset which is decreasing. Trading Inventory is also an Asset and is increasing. A - 150 + 150 = O/E + L Overall effect 0 More examples of Assets include: Buildings, Petty Cash, Equipment, Office Furniture and vehicles Wamark Publishers ©

Transaction: Cash Sale R 200 Cost of Sales (Cost Price) R 150 Assets + DR Sales DR Income + Expenses + Bank (A) CR Effect on Accounting Equation 200 Sales (I) Sales is an Income. An income increases Owner’s Equity Bank is an Asset that increases when cash is deposited. A = O/E + L + 200 = + 200 CR Bank 200 DR Trading Inventory (A) CR Cost of sales DR Cost of Sales ( E) CR Trading Inventory 150 Trading Inventory is an Asset which decreases when goods are sold. Cost of Sales (Cost Price) is an Expense which decreases Owner’s Equity A = O/E + L - 150 = - 150 The difference between the selling price and the cost price is called a profit Wamark Publishers ©