Chapter 3
Accounts
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I. ACCOUNT & T- ACCOUNTS
• An account is an individual accounting record of increases and
decreases in a specific asset, liability, or owner’s equity item.
• In its simplest form, an account consists of three parts: (1) a
title, (2) a left or debit side, and (3) a right or credit side.
Because the format of an account resembles the letter T, we
refer to it as a T account
I. ACCOUNT & T- ACCOUNTS
I. ACCOUNTS & T- ACCOUNTS
II. Principle for recording transaction
The double- entry system
1. State the transaction.
2. Analyze the transaction to determine which accounts
are affected.
3.Apply the rules of double-entry accounting by using
T-accounts to show how the transaction affects the
accounting equation.
4. Show the transaction in journal form.
Debit Account Name Amount
Credit Account Name Amount
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II. Principle for recording transaction
The double- entry system
July 1: Joan Miller invests $40,000 in cash to form Miller Design
Studio.
Analysis: An owner’s investment in the business increases the
asset account Cash with a debit and increases the owner’s equity
account J. Miller, Capital with a credit.
Debit cash (111): $40,000
Credit J.Miller, Capital (411) $40,000
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II. Principle for recording transaction
The double- entry system
July 3: Rents an office; pays two months’ rent in advance, $3,200.
Analysis: The prepayment of office rent in cash increases the
asset account Prepaid Rent with a debit and decreases the asset
account Cash with a credit.
Debit Prepaid Rent (242): $3,200
Credit Cash (111) $3,200
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II. Principle for recording transaction
The double- entry system
• July 6: Purchases equipment, $16,320; pays $13,320 in cash
and agrees to pay the rest next month.
• Analysis: The purchase of equipment in cash and on credit
increases the asset account Equipment with a debit, decreases
the asset account Cash with a credit, and increases the liability
account Accounts Payable with a credit.
Debit Equipment (211): $16,320
Credit Cash (111) $13,320
Credit Accounts Payable $3,000
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II. Principle for recording transaction
The double- entry system
• July 15: Performs a service for a department store by designing
a TV commercial; bills for the fee now but will collect the fee
later, $9,600.
• Analysis: A revenue billed to a customer increases the asset
account Accounts Receivable with a debit and increases the
owner’s equity account Design Revenue with a credit.
Accounts Receivable is used to indicate the company’s right to
collect the money in the future.
Debit Accounts Receivable (131): $9,600
Credit Design Revenue (511) $9,600
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Exercise 1
•At a company, the following transactions occurred:
Transaction 1: Withdraw 200 million VND from the bank deposit (cash at bank)
into the cash fund.
Transaction 2: Use cash in hand to purchase some supplies worth 30 million
VND.
Transaction 3: Purchase some raw materials worth 40 million VND by using cash
at bank.
Transaction 4: Purchase equipment worth 400 million VND and paid by cash at
bank.
Transaction 5: Purchase a piece of land worth 3 billion VND and pay by cash at
bank
Transaction 6: Calculate the ending balance of accounts 111, 112, 211 knowing
that the beginning balances of these accounts are as follows:
•Account 111: 10 billion VND
•Account 112: 20 billion VND
•Account 211: 800 million VND
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Exercise (continue)
•At a company, the following transactions occurred:
Transaction 7: Borrow 300 million VND from Agribank and receive it in
cash in hand.
Transaction 8: Purchase some raw materials worth 500 million VND on
credit
Transaction 9: Use cash at bank to pay 100 million VND owed to the
seller from transaction 8.
Transaction 10: Use cash in hand to pay 20 million VND in taxes to the
State.
Transaction 11: Use cash at bank to pay salaries to employees totaling
40 million VND.
Transaction 12: Calculate the ending balance of accounts 331 and 341,
knowing that the beginning balances of these accounts are as follows:
•Account 331: 500 million VND
•Account 341: 1 billion VND
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Exercise 2
At a company, the following transactions occurred:
Transaction 1: Owner A contributed 600 million VND in cash, and Owner
B contributed 700 million VND in bank deposits to establish the company.
Transaction 2: Transfer retained earnings to a reward and welfare fund
with the amount of 40 million VND.
Transaction 3: Calculate the ending balance of account 411, knowing that
the beginning balance of this account is 0 VND.
Transaction 4: The company rented a house for use as an office with a
rental fee of 10 million VND per month and paid in cash.
Transaction 5: The company advertised on television for 30 million VND,
1/4 of which was paid in cash in hand, and the remaining amount was
paid by cash at bank
Exercise 2
At a company, the following transactions occurred:
Transaction 6: The company incurred repair costs for machinery and
equipment used in the production department amounting to 5 million
VND, which has not been paid.
Transaction 7: The company incurred repair costs for machinery and
equipment used in the office department amounting to 6 million VND, of
which 1/5 was paid in cash in hand, and the remaining amount has not
been paid.
Transaction 8: Electricity and water costs incurred in the production
department amounted to 10 million VND, and in the office department
amounted to 8 million VND, all of which have not been paid.
Exercise 2
At a company, the following transactions occurred:
Transaction 9a: The company purchased goods worth 100 million VND
on account.
Transaction 9b: The company sold all the goods purchased in transaction
9a to Customer A for a selling price of 160 million VND, and Customer A
paid the company in cash at bank. The cost of goods sold was 100
million VND.
Transaction 10a: The company purchased goods worth 200 million VND
and paid by cash at bank
Transaction 10b: The company sold all the goods purchased in
transaction 10a to Customer B for a selling price of 280 million VND on
account. The cost of goods sold was 200 million VND
