ZIMSEC O Level · Principles of Accounts · Form 3
Every transaction has two effects: one account is debited and another credited with the same amount.
Rules
- Assets and expenses increase on the debit side; decrease on the credit.
- Liabilities, capital and income increase on the credit side; decrease on the debit.
- Debit the account receiving value; credit the account giving value.
Examples
- Bought goods for cash: Dr Purchases, Cr Cash.
- Sold goods on credit to Moyo: Dr Moyo (receivable), Cr Sales.
- Paid wages by cheque: Dr Wages, Cr Bank.
- Owner took cash for personal use: Dr Drawings, Cr Cash.
Balancing an account
Add both sides, find the difference, enter it as “balance c/d” on the smaller side, total both sides equally, and bring the balance down (b/d) on the opposite side.
Worked example: Moyo's account: Dr sales 800, 300; Cr cash received 600. Balance it.
Debit total 1 100; credit 600. Balance c/d 500 on the credit side.
Totals 1 100 each; balance b/d 500 on the debit side (Moyo owes US$500).
Exam tip: Write the name of the OTHER account in the details column of each entry.
Check yourself
- Give the double entry for buying a computer on credit from Tech Ltd.
- Give the double entry for cash sales.
- What does a debit balance on a customer's account mean?
Show answers
- Dr Office equipment (computer), Cr Tech Ltd.
- Dr Cash, Cr Sales.
- The customer owes the business money (a trade receivable).
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