Double-entries

Note payable

a formal written promise to pay a specific sum of money at a future date

Drawings

any cash, goods, or assets that a business owner or partner withdraws from the company for personal use

Share premium

The extra amount an investor pays for a newly issued share above its nominal (par) value

Issued share capital

The total nominal (par) value of all shares a company has actually allotted, issued, and entered on its register of members

Revaluation reserve

an equity account that records the unrealized upward change in the fair value of long-term assets, such as property, plant, and equipment

Fundamental double-entry equation

SUM OF DEBITS = SUM OF CREDITS

Debits vs credits

What are debits & credits?

= merely used for recording transactions, absolutely no deeper meaning

• Debit = left-hand entry

• Credit = right-hand entry

Each transaction must affect 2 or more accounts in order to keep the basic accounting equation in balance (A=E+L)

• Recording is done by debiting at least one account and crediting another

• DEBITS = CREDITS

DEBIT

AED ^ = Debit it!

LRE v = Debit it!

CREDIT

LRE ^ = Credit!

AED v = Credit it!

Sales

the money the business earns by selling goods.

Cost of sales

What the shop originally paid for the goods it sold.

How to DEBK

1. Use a separate account for each item of asset, expense, income, equity, and liability

2. LHS = Debit

   1. Record increases and decreases in assets, expenses, decreases in liability

3. RHS = Credit

   1. Record increases in revenue, liability, equity, decreases in assets, expenses

4. There HAS to be an equal credit entry in one account for a debit entry in another (debits = credits for each transaction)

What resets to zero?

At the end of the reporting period, INCOME and EXPENSE accounts must be reset to zero.

• They are temporary accounts and are used to produce the income statement of the reporting period and are not carried over into the future

What remains permanent?

Alternatively, permanent accounts are assets, liabilities, and equity accounts.

• These accounts are NOT closed and instead, the balance is carried over to the next accounting period