Unit 3 Introducing Double-Entry System
Lead-in
Identify the blanks in the picture below.Match the blanks with the words in the box.
Section A
Dialogue 1
Miss Liu is a newly-appointed accountant in a famous company.Mr.Wang was a senior accountant in this company.Mr.Wang is introducing the double-entry system to Miss Liu.
L=Miss Liu W=Mr.Wang
W: Good morning, Miss Liu.I am Mr.Wang, the senior accountant of this company.Nice to meet you.
L: Nice to meet you too.
W: I will introduce new techniques used by most accountants in the world to you to help you get familiar with your work as soon as possible.
L: Thank you very much.
W: The technique is called a double-entry recording process.To understand it better I will introduce the T account.
L: I know the T account.T account is an individual accounting record that shows information about increases and decreases in one balance sheet or income statement account.It is called so because it has a form of letter T.
W: Yes, you are right.On the top of the horizontal bar there is the account title.Account decreases and increases are placed on the either side of the vertical bar.The left side of the T account is called Debit, and the right side is called Credit.Often these two terms are abbreviated as Dr.and Cr.It is common to say that an account has been debited when the amount is placed on the left side of an account, and credited if the amount is placed on the right side.Account balance is the difference between the debit and the credit side of a T account.Now can you define the double-entry system?
L: You mean the double-entry recording system provides for the equality of total debits and total credits, right?
W: You are correct.
L: What should we notice when we use the double-entry accounting system?
W: The double-entry rule can be helpful when we need to find a mistake in financial records.If total debits do not equal total credits, there must be a mistake.However, this system cannot ensure complete accuracy.For example, even if we do make sure debit balances equal credit ones, it is quite possible to choose a wrong account debit (credit) while making an entry.Two important rules about double-entry recording system:
Assets=Claims (Liabilities and Owner’s Equity)
Total Debits=Total Credits
L: I got it.Thank you very much for your concrete introduction and great patience.
New Words
Phrases and Expressions
accounting record 会计记录
account balance 账户结余
debit balance 借方余额；借方差额
Dialogue 2
Mr.Wang is introducing the the rules of debit and credit.
L=Miss Liu W=Mr.Wang
L: Good morning, Mr.Wang.
W: Good morning, Miss Liu.
L: Mr.Wang, Thank you very much for introducing me the double-entry system last time.Would you mind introducing me the rules of debit and credit?
W: We already know how business transactions cause a change in one or more of the three basic accounting elements.Accuracy is improved because the accounting equation must balance after each transaction.The equality of debits and credits provides the basis for the universally used double-entry system of recording transactions.Luca Pacioli, an Italian monk, introduced double-entry accounting back in 1494.
L:Why it can exist for such a long time?
W: The reason that double-entry accounting has been in existence for over 500 years is because it ensures accuracy.Learning the rules of debits and credits is similar to learning the rules on how to drive a car.You learn to drive your car on the right side of the road.As you learn debits and credits, remember there are established rules that everyone must follow.
L: Could you tell me more details?
W: Increases in assets are debited to asset accounts; Increases in liability and capital items are credited to liability and capital accounts.
L: So you mean decreases must be credited and debited?
W: You are right.And capital was increased by the owner’s investments and by revenues.Capital was decreased by expenses and by withdrawals.With this recollection, we offer some additional rules.
L: What rules?
W: Investments by the owner of a business are credited to the owner’s capital account and since the owner’s withdrawals of assets decrease owner’s capital, they are debited to the owner’s drawing account.Besides, since revenues increase capital, they are credited in each case to a revenue account that shows the kind of revenue earned.Lastly, Since expenses decrease owner’s capital, they are debited in each case to an expense account that shows the kind of expense incurred.At this stage, you will find it helpful to memorize these rules.You will apply them over and over in the course of your study.
L: Okay, I get it.It’s very kind of you.Thanks a lot.
W: You are welcome.
New Words
Phrases and Expressions
accounting equation 会计恒等式
asset account 资产账户
capital account 固定资产账户
Exercise 1
Decide whether the following statements are true (T) or false (F) according to the dialogues.
□ 1.T account is an individual accounting record and it is so called because it has a form of letter T.
□ 2.It is common to say that an account has been debited when the amount is placed on the right side of an account, and credited if the amount is placed on the left side.
□ 3.The double-entry recording system provides for the equality of total debits and total credits.
□ 4.The double-entry accounting has been in existence for less than 500 years.
□ 5.It is unnecessary to know the rules of the double-entry system.
Exercise 2
Oral practice: Pair work.Use the questions below to interview your partner.Then change roles.
1.What is T account?
2.Can you introduce me the double-entry system?
3.What should we notice when we use the double-entry accounting system?
4.Would you mind introducing me the rules of debit and credit?
5.Can you show some specific examples of the double-entry system?
Exercise 3
Practical activity: Work in pairs and make a conversation.
Suppose you are Mr.Li, a senior accountant of a large international corporation.It is the first time you meet the new staff Miss Wang who will work in the accounting department with you.
Section B
The Account
An account may be defined as a record of the increases, decreases, and balances in an individual item of asset, liability, capital, revenue, or expense.
The simplest form of the account is known as the “T” account because it resembles the letter “T”.The account has three parts: (1) the name of the account and the account number, (2) the debit side (left side), and (3) the credit side (right side).The increases are entered on one side, and the decreases on the other.The balance (the excess of the total of one side over the total of the other) is inserted near the last figure on the side with the larger amount.
When an amount is entered on the left side of an account, it is a debit, and the account is said to be debited.When an amount is entered on the right side, it is a credit, and the account is said to be credited.The abbreviations for debit and credit are Dr.and Cr., respectively.
Whether an increase in a given item is credited or debited depends on the category of the item.By convention, asset and expense increases are recorded as debits while liability, capital and income increases are recorded as credits.Assets and expense decreases are recorded as credits, while liability, capital, income decreases are recorded as debits.The following tables summarize the rule:
Assets and Expenses
Liabilities, Capital and Income
Example:
T & T Co.LTD bought furniture from ABC Co.on account, $2 000.In this event, the company is receiving an asset (furniture) and therefore, debits Furniture to show the increases.They are not paying cash but creating a new liability, thereby increasing the liability account (Accounts Payable).(https://www.daowen.com)
Furniture
Accounts Payable
An account has a debit balance when the sum of its debits exceeds the sum of its credits; it has a credit balance when the sum of creditors is the greater.In double-entry accounting, which is in almost universal use, there are equal debit and credit entries for every transaction.Where there are only two accounts affected, the debit and credit amounts are equal.If more than two accounts are affected, the total of the debit entries must equal the total of the credit entries.
New Words
Phrases and Expressions
T account T型账户
debit side 借方
credit side 贷方
debit balance 借方余额
credit balance 贷方余额
double-entry accounting 复式记账
Exercise 1
Choose the best answer to each of the following questions.
1.What is NOT mentioned in the text?
A.Usefulness of an account.
B.Characteristics of an Account.
C.The abbreviations for debit and credit.
D.The difference of debit side and credit side.
2.How many parts of the T account?
A.One. B.Two. C.Three. D.Four.
3.Which one is not the part of the T account?
A.The name of the account and the account number.
B.The debit side.
C.The credit side.
D.Asset.
4.According to the text, which of the following statement is NOT true?
A.The balance of the T account is inserted near the last figure on the side with the lager amount.
B.When an amount is entered on the left side of an account, it is a debit, and the account is said to be debited.
C.Practitioners of accounting are called accountants.
D.The abbreviations for debit and credit are Dr.and Cr., respectively.
5.Which of the following statement is not NOT true about the double-entry accounting?
A.In double-entry accounting，there are equal debit and credit entries for every transaction.
B.The double-entry accounting is in almost universal use.
C.Where there are only two accounts affected, the debit and credit amounts are equal.
D.If two accounts are affected, the total of the debit entries must equal the total of the credit entries.
Exercise 2
Fill in the blanks with the words given below.Change the form where necessary.
1._______is a resource controlled by an entity as a result of a past event from which it is probable that future economic benefits will flow.
2._______is a present obligation arising from a past event, the settlement of which results in an outflow of resources embodying future economic benefits.
3.The account has three parts: ① the name of the account and the account number, ② the debit side (left side), and ③_______(right side).
4._______is the residual interest in the net assets of an entity after having deducted all liabilities.
5._______as increases in economic benefits arising from the enhancement of assets or reduction in liability that results in increases in equity other than those arising from contributions from equity participants.
6.Regardless of whether the_______in the Factory Overhead account is a debit or credit, any remaining balance must be disposed of before a new accounting period begins.
7._______are decreases in economic benefits in the form of depletion of assets or increase in liabilities that result in decreases in equity other than those arising from distribution to equity participants.
8._______is revenues deducted by expenses if the result is positive.Loss is revenues deducted by expenses if the result is negative.
9.Under the_______, every business transaction is recorded in at least two accounts.
10.The simplest form of the account is known as the_______because it resembles the letter “T”.
Exercise 3
Translate the following sentences into Chinese.
1.In this case, you should count the flow as one transaction.
2.The accounting double entry is you record an increase in the cash asset account on the balance sheet and a corresponding equal increase in the advertising revenue account.
3.If the Income Summary account has a debit balance, then the company has suffered a loss for the current period.
4.Double-entry accounting means that the amounts of debit and credit entries must be equal when accounts record every business transactions.
5.No business can survive without a capital account.
课文译文
账 户
账户可以被定义为反映资产、负债、资本、收入和支出各项目的增加、减少和结余情况的记录。
最简单的账户形式被称为T形账户，因为它的形状好像字母T。这种账户由三部分组成：（1）账户名称和账号，（2）借方（左边），（3）贷方（右边）。增加记入一边，减少记入另一边。结余（一边总额超过另一边总额的数）被插记在数额大的那一边的最后一个数字下面。
账户名称
当一个数额记在账户的左边时，它就是借方记录，这个账户就是被借记。当一个数额记在右边，它就是贷方记录，可以说这个账户被贷记。借贷两个字的缩写分别为Dr.和Cr.。
某一项目的增加是贷记还是借记取决于该项目的种类。根据惯例，资产和费用的增加被记为借项，而负债、资本和收入增加被记为贷项。资产和费用的减少被记为贷项；而负债、资本和收入减少被记为借项。下表汇总了上述记账规则。
资产与费用
负债、资本与收入
例：
特第有限公司从 ABC 公司赊购家具，价值两千美元。在这个交易中，公司收到资产（家具），因此，借记家具账户表示资产增加。由于他们不付现金，因此产生了新的负债，因此增加负债账户（应付账款）。
家具
应付账款
当一个账户上借项数超过贷项数时，这个账户就出现了借方余额。但当它的贷项数大于借项数时，就出现了贷方余额。在复式记账法下，每笔交易的借项和贷项记入的数字相等。现在复式记账法在全世界得到了普遍的使用。在只有两个受影响的账户时，借贷双方的数额是相等的。但如果涉及两个以上的账户时，记入借项的总数必须与记入贷项的总数相等。
Reference
孙坤， 胡英坤.会计英语[M].沈阳：东北财经大学出版社，2004.
