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Double Entry Bookkeeping (part a) – ACCA Financial Accounting (FA) lectures

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  1. Hello,
    Q: In Lecture notes Chapter 3, example 5 , in it, while calculating claculating profit and loss , We added:
    purchase $ 1100 | sales $1700
    rent $ 200 |
    _______________________________
    profit = 400 $

    (WHY don’t we add car purchase? do we add as an expense ? )

  6. Hi Sir,

    Hope your in good health and spirits. Question on last entry of drawings. Is this treated in same manner as dividends? I.e it is part of owners equity which essentially increases with credit but as it reduces equity it is seen as a contra asset account hence increased with debit? Also in equations it is in credit side but with a negative, increase in net assets=capital+profit-drawings.

    Thanks in advance

      • I think you credit income because sales/profit belongs to the owner or shareholders of the business so is now capital (owed to the owners) essentially a liability from the businesses perspective. And back to the entry credit rule ‘an increase in a liability’ which is the profit.

    • I think the word “sales” here is the number of goods sold. If you credit sales, it means that the number of goods has decreased and you received cash in exchange (DR cash for sales).

      The same logic applied to Receivable; CR sales => number of goods fall in exchange for Receivable (DR receivable for sales).

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