Chapter 3 Double Entry System

Source Documents

These refer to the original documents that provide evidence of a transaction, such as invoices, receipts, contracts, purchase orders, bank statements, and sales orders.

The Account and its Analysis

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense.

So first off, it is important to identify which category this account belongs to: 'Asset, Cash, Equity'?"

Asset Accounts

Cash, Accounts Receivable, Note Receivable(应收票据), Prepaid Accounts, Supplies Accounts, Equipment Accounts, Buildings Accounts, land

Liabilities Accounts

Accounts Payable, Note Payable, Unearned Revenue Accounts(预收账款), Accrued Liabilities(应计负债)


Just remember the equation (used later)

Equity= Owner's capital- Owner's withdrawals+ Revenues- Expenses

Double Entry Accounting


The steps in processing transactions

  1. Identify
  2. Analyze
  3. Record
  4. Post journal information to ledger accounts(将日记账信息记录到分类账账户)

An example: Page 54 of the book

Further Investigation into the equation

Let's expand and rearrange the equation, namely:

Assets+ Owner's withdrawals+ Expenses= Liabilities+ Owner's capital+ Revenues

Remember, if the element of the left side increases, it is to 'debit the account'; if decreasing, it is to credit the account. And visa versa.