Role of an Accountant (26s - 57s)

 Primary responsibility: Overseeing all financial transactions

within an organization.

 Accountants prepare financial reports that are essential for:

o Management

o Board of Directors

o Other stakeholders (investors, regulators, etc.)

 These reports help organizations make informed financial

decisions.

Key Responsibilities of an Accountant (12s - 296s)

1. Recording Transactions (12s - 39s)

 Accountants handle source documents such as:

o Invoices
o Goods received notes
o Receipts
 These records may be in physical or electronic form.
 Accountants must record every single financial transaction to ensure accuracy.

2. Classifying Transactions (42s - 103s)

 Transactions must be grouped into categories:

o Accounts Receivable (money owed to the company).
o Accounts Payable (money the company owes).
o Assets (resources owned by the company).
o Liabilities (debts owed by the company).
 Classification helps in understanding financial statements.

3. Analyzing Transactions (106s - 121s)

 Accountants examine each transaction in detail to ensure:

o It is recorded correctly.
o It is categorized properly.
 Analysis helps detect errors or inconsistencies.

4. Summarizing Information (125s - 176s)

  Once all transactions are recorded and classified, accountants summarize data into
reports.
 Example: If a company purchases 200 vehicles, accountants won’t list each purchase
separately.
o Instead, they aggregate the total cost into a single figure in financial reports.
 Financial reports show:
o Company’s profits/losses.
o Assets and liabilities.
o Overall financial health.

5. Communicating Financial Information (179s - 237s)

 Accountants prepare and share financial reports with decision-makers, such as:
o Managing Director (MD)
o Chief Financial Officer (CFO)
o Departmental Managers
 Example:
o The Marketing Director checks financial statements and sees that they have
exceeded their budget (spent 40 million KES instead of 37 million KES).
o Based on this, the director might:
 Stop marketing campaigns to avoid overspending.
 Request additional budget from the board.

The Final Output: Financial Statements (243s - 296s)

 Proper accounting creates an organized system.
 Accountants file financial records systematically so transactions are easy to track.
 The end goal is to produce accurate financial statements, which show:
o Assets (what the company owns).
o Liabilities (what the company owes).
o Profitability (how much the company earned/lost).

Introduction (0s - 9s)

 The webinar covers the objectives and goals of financial accounting.
 Accounting helps businesses understand their financial performance, position, cash
flow, tax obligations, and decision-making.

1. Assessing Financial Performance (12s - 60s)

  Accountants gather and analyze financial data to determine:
o Is the company making a profit or a loss?
 Without proper accounting, a company may not realize it is losing money.
 Companies earn revenue from sales but also spend money on:
o Marketing
o Product creation
o Employee salaries
o Rent and utilities
 Accountants calculate net profit or loss by comparing income vs. expenses.

2. Understanding Financial Position (64s - 129s)

 Companies need to know:
o Do customers owe us money (assets)?
o Do we owe more money to others (liabilities)?
 Accountants determine whether a company is in a:
o Net Asset Position → The company owns more than it owes (positive).
o Net Liability Position → The company owes more than it owns (negative).
 This information helps management and the board of directors make strategic
decisions.

3. Monitoring Cash Flow (130s - 202s)

 Cash flow tracking ensures a company has enough money to operate.
 Cash inflows (money coming in):
o Sales revenue
o Investments
 Cash outflows (money going out):
o Paying suppliers
o Loan repayments
o Employee salaries
 Accountants assess whether a business has:
o Positive cash flow → More cash coming in than going out.
o Negative cash flow → More cash going out than coming in.
 A company may be profitable but still struggle with cash flow if payments are delayed.

4. Calculating Tax Liability (204s - 243s)

  Businesses must pay taxes on profits to revenue authorities (e.g., Kenya Revenue
Authority - KRA).
 The accountant’s role:
o Calculate tax owed.
o Ensure the company pays on time to avoid penalties.
 Failure to pay taxes can result in government audits and heavy fines.

5. Supporting Decision-Making (248s - 288s)

 Financial reports help management decide the company’s future.
 Examples:
o If a product is profitable, the company may invest more in it.
o If a product is losing money, management may stop selling it.
 Accounting provides key data to guide business strategies.

Introduction to Financial Statements (0s)

 The video introduces the elements of financial statements and their importance in
understanding a company’s financial health.
 Financial statements contain multiple reports that help assess a business's performance.

Key Components of Financial Statements (6s - 21s)

 A financial statement consists of several reports:
o Income Statement – Determines whether a company is making a profit or loss.

o Balance Sheet – Shows the assets (what a company owns) and liabilities (what
it owes).
o Cash Flow Statement – Tracks the movement of money coming in and going
out.
o Equity Statement – Shows the capital invested in the company and whether
it’s growing.

1. Income Statement (Profit & Loss Statement) (21s - 101s)

  The income statement provides insight into whether a business is profitable or
operating at a loss.
 It includes:
o Revenue (Income) – Money received from sales or services.

o Expenses – Costs incurred in running the business (e.g., rent, salaries, utilities).

o Profit/Loss Calculation → Revenue - Expenses

Example of a Small Business (Chicken Sales Business) (27s - 97s)

 Suppose you sell chickens and make 100,000 KES in revenue.
 However, you spend 120,000 KES on feed, cleaning, and other expenses.
 Since expenses exceed revenue, the business makes a loss of 20,000 KES.
 This loss is reported in the income statement.

2. Balance Sheet (Assets & Liabilities) (101s - 119s)

 The balance sheet shows what a company owns (assets) and what it owes (liabilities).
 Assets = Resources owned by the company (e.g., land, machinery, cash).
 Liabilities = Debts the company must pay (e.g., bank loans, supplier payments).
Example of Assets & Liabilities (104s - 116s)
 If a business owns land (an asset) but has a loan from the bank (a liability), the balance
sheet reflects both.
 The difference between assets and liabilities determines the company’s financial health.

3. Cash Flow Statement (Money Movement) (119s - 131s)

 The cash flow statement shows how money flows in and out of the business.
 It helps track whether a company has a positive cash balance or is running out of cash.
 A business can be profitable on paper but still run out of money if cash is mismanaged.

4. Equity Statement (Company Ownership & Growth) (131s - 151s)

 Equity represents the capital invested in the company and any accumulated profits.
  If a business is profitable, equity increases because profits are reinvested.
 If a business faces losses, equity decreases over time.

Real-World Example: Car & General (Nairobi Securities

Exchange) (151s - 327s)
 The video analyzes the financial performance of Car & General, a company listed on
the Nairobi Securities Exchange.
 Financial statements for the company are publicly available for investors.

Revenue & Profit Growth (179s - 239s)

 2022 Revenue: 17 billion KES

 2021 Revenue: 12 billion KES
 Profit Growth:
o 2021 Profit: 1.9 billion KES
o 2022 Profit: 3 billion KES

Breakdown of Costs & Profitability (242s - 279s)

 Cost of Sales Increased

o 2021: 10 billion KES
o 2022: 13 billion KES
 Despite higher costs, gross profit increased due to revenue growth.

Expenses & Net Profit (281s - 320s)

 Expenses include: Salaries, rent, administrative costs.

 2022 Net Profit: 887 million KES (after all deductions).

Financial Position (Assets & Liabilities) (327s - 555s)

 The balance sheet provides an overview of what the company owns and owes.
 Key assets of Car & General:
o Investment properties: 3.5 billion KES
o Plant & Equipment: 2 billion KES
o Intangible Assets (e.g., software): 21 million KES
 Liabilities include:
o Loans from banks
o Lease liabilities (rent obligations)
o Trade payables (money owed to suppliers)
  Equity Capital:
o Initially 200 million KES, but has grown over time as profits were reinvested.
o Current equity: 4.8 billion KES

Understanding Assets, Liabilities, and Equity (555s - 867s)

1. Assets (What a Company Owns) (618s - 712s)

 Assets generate future profits for a business.

 Two types:
o Current Assets (Short-term, <12 months): Cash, inventory, accounts receivable.
o Non-Current Assets (Long-term, >12 months): Buildings, equipment, vehicles.

2. Liabilities (What a Company Owes) (715s - 850s)

 Current Liabilities (Short-term, due in <12 months): Accounts payable, short-term

loans.
 Non-Current Liabilities (Long-term, due in >12 months): Bank loans, long-term leases.

3. Equity (Business Ownership & Growth) (722s - 746s)

 Initial capital invested in the company.

 Grows when a company makes a profit.
 Decreases if the company suffers losses.

4. Profit Calculation (754s - 766s)

 Formula: Profit = Revenue - Expenses

 If revenue is greater than expenses → Profit
 If expenses are greater than revenue → Loss

5. Financial Terminology: Current vs. Non-Current (768s - 867s)

 Current (Short-term, <12 months)

 Non-Current (Long-term, >12 months)

Conclusion (Key Takeaways) (867s)

1. Financial Statements help businesses understand their financial health.
2. Income Statement shows whether a business is making a profit or loss.
 3. Balance Sheet provides an overview of assets and liabilities.
4. Cash Flow Statement ensures a business does not run out of cash.
5. Equity represents business ownership and growth over time.
6. Understanding financial statements is crucial for business success.

1. What is Capital? (1s - 88s)

 Capital is the money invested to start a business.
 Example: A student selling calculators to accountants in college.
 Sources of Capital:
o Personal savings
o Money from parents (gift, not a loan)
o Borrowings (not counted as capital, but as a liability)

2. Understanding Assets (91s - 237s)

 Definition (per IFRS - International Financial Reporting Standards):
o A present economic resource controlled by the entity due to past events.
 Key Features of an Asset:
o The business owns or controls it.
o It has economic value (can be sold or generate cash).
o It results from past transactions (e.g., sales, purchases).
 Examples of Assets:
o Land, vehicles, inventory (goods for sale).
o Cash (most liquid asset).
o Accounts receivable (money owed by customers).

Liquidity of Assets (270s - 311s)

 Cash = Most liquid asset (can be used instantly).

 Other assets may take time to convert to cash:
o Land might take months or years to sell.
o Vehicles may lose value over time.

3. Understanding Liabilities (314s - 384s)

  Definition: An obligation to transfer resources due to past events.
 Key Features of a Liability:
o The business owes money to someone.
o Results from past transactions (e.g., loans, purchases on credit).
o The company must pay it back in the future.
 Examples of Liabilities:
o Bank loans
o Unpaid supplier bills (accounts payable)
o Taxes owed to the government

4. Understanding Equity (399s - 456s)

 Definition: Equity = Assets - Liabilities
 Represents the owner’s share in the business after all debts are paid.
 Key Features of Equity:
o Includes initial investment (capital) + retained profits.
o If a company makes profits, equity grows.
o If a company loses money, equity decreases.

5. Real-World Example: John’s Poultry Business (528s -

858s)
Scenario 1: Calculating Capital

 John receives:
o 1.5M KES as a gift from parents (capital).
o 300K KES as a loan from his sister (liability).
 Capital (Equity) = 1.5M KES (loans don’t count as capital).

Scenario 2: Calculating Total Assets

 Total cash in the business = 1.8M KES

o (1.5M from parents + 300K loan).
 Assets include cash, land, inventory, etc.

Scenario 3: Calculating Liabilities

 Only liability = 300K KES (loan from sister).

 Future planned expenses (e.g., land purchase) are not liabilities yet.
Key Takeaways
✅ Capital = Owner’s investment.
✅ Assets = What the business owns.
✅ Liabilities = What the business owes.
✅ Equity = Assets - Liabilities (owner’s share).

1. Introduction to the Accounting Equation (0s - 10s)

 The accounting equation is a fundamental rule in accounting.

 It must always balance and cannot be violated.

The Accounting Equation:

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \
text{Equity}Assets=Liabilities+Equity

 This equation forms the foundation of financial accounting.

2. Rearranging the Equation (13s - 51s)

 The equation can be rewritten in different forms:

o Equity = Assets - Liabilities

o Liabilities = Assets - Equity

 Regardless of how it's rearranged, the equation must always hold

true.

3. Real-World Example: Car & General Financial Statements (54s -

153s)

 Equity represents:

o Initial Capital (money invested in the business).

o Retained Earnings (profits accumulated over previous years).

 In financial statements, equity is listed under "Capital and

Reserves."
  Assets include all resources owned by the business.

 Liabilities represent amounts owed to external parties.

Breakdown of Equity Components (77s - 120s)

 Share Capital = The initial money invested to start the business.

 Retained Earnings = Profits kept in the business from previous

years.

 Equity grows when the business makes profits.

4. Verifying the Accounting Equation (156s - 238s)

 Using Car & General's financial data, the video proves the equation
works:

Car & General's Financial Data:

 Equity = 4.853 billion KES

 Total Assets = 14.447 billion KES

 Total Liabilities = 9.593 billion KES

 Calculation: Equity=Assets−Liabilities\text{Equity} = \text{Assets} - \

text{Liabilities}Equity=Assets−Liabilities
4.853B=14.447B−9.593B4.853B = 14.447B -
9.593B4.853B=14.447B−9.593B

 The equation holds true! ✅

5. Key Takeaways

✅ The accounting equation always balances.

✅ Equity = Initial Capital + Retained Earnings.
✅ Assets are funded by either liabilities or equity.
✅ Companies use financial statements to track this balance.

1. Introduction: Who Uses Financial Statements? (0s - 6s)

 Financial statements are essential for various stakeholders.
  They help individuals and organizations make financial decisions.

2. Investors & Shareholders (6s - 57s)

 Investors use financial statements to decide which companies to invest in.
 Example: Nairobi Securities Exchange (NSE)
o Investors analyze financial reports to determine which company is performing
well.
o Example: Safaricom – If financial statements show high profits and growth,
investors may buy shares.
 Accountants prepare financial statements, making them a key resource for investment
decisions.

3. Management & Decision-Making (60s - 75s)

 Management relies on financial statements to evaluate:
o Whether the company is profitable or operating at a loss.
o If it is worth continuing with certain products or services.
 Financial reports help in strategic planning and business growth.

4. Banks & Financial Institutions (81s - 114s)

 Banks require financial statements before granting loans.
 They use them to:
o Assess whether a company can repay a loan.
o Determine if the business is financially stable.
 If a company fails to meet loan obligations, banks may demand immediate
repayment.

5. Customers & Suppliers (119s - 155s)

 Large customers (e.g., Safaricom, UNICEF, Kenya Commercial Bank) often check
financial statements before:
o Entering into business partnerships.
o Ensuring that a supplier can handle large transactions.
 Suppliers also review financial reports before offering credit terms to businesses.
6. Government & Tax Authorities (159s - 168s)
 Kenya Revenue Authority (KRA) and other tax agencies use financial statements to:
o Verify if companies are paying the correct taxes.
o Identify potential tax fraud or evasion.

7. The General Public (171s - 197s)

 The public may have an interest in financial statements if:
o A company is publicly traded (e.g., listed on the Nairobi Securities Exchange).
o It is a government-owned entity.
 Shareholders review financial reports to track company performance.

Key Takeaways
✅ Financial statements are used by:
✔️Investors (to decide where to invest).
✔️Management (to guide decision-making).
✔️Banks (to assess loan repayment ability).
✔️Customers & Suppliers (to evaluate business reliability).
✔️Government & Tax Authorities (to ensure tax compliance).
✔️The Public (to monitor company performance).

1. Introduction to the Accounting Process (0s - 9s)

 The video covers Module 2: Accounting Process & Systems.

 Focus: Source documents, which are the starting point for

recording financial transactions.

2. What Are Source Documents? (12s - 31s)

 Definition: Documents used as evidence of a transaction in

accounting.

 Purpose:
 o Serve as proof of business activities.

o Used to record transactions in accounting systems.

 Example:

o When you buy an item at a supermarket, the receipt is a

source document.

Types of Source Documents (34s - 78s)

1. Invoices – Sent to customers after providing goods or services.

2. Receipts – Given when a customer makes a payment.

3. Electronic Transactions – Many transactions now occur online (e.g.,

M-Pesa receipts).

3. Shift from Paper to Digital Accounting (90s - 126s)

 Many transactions no longer require paper documents.

 Example: Barcode scanners in inventory management automatically

update accounting records.

 Despite automation, understanding manual processes is

essential for accountants.

4. Understanding Invoices (162s - 345s)

 Definition: A document sent to a customer requesting payment for

goods or services.

 Who Issues Invoices?

o Suppliers (for products/services provided).

o Businesses (when selling to customers).

Key Components of an Invoice

1. Business Name – The name of the company issuing the invoice.

2. Customer Name – The recipient of the invoice.

3. Invoice Date – Indicates when the transaction occurred.

 4. Itemized List – Details of goods/services purchased (e.g., 2kg rice,
3kg sugar).

5. Terms & Conditions – Payment deadlines (e.g., "Due in 30 days").

6. Total Amount Payable – The final amount after adding all items
(including discounts if applicable).

Key Takeaways

✅ Source documents (invoices, receipts) are essential in accounting.

✅ Modern transactions (e.g., digital payments) still require proper
documentation.
✅ Invoices contain critical details like date, items, total cost, and
payment terms.

1. Introduction to Books of Prime Entry (0s - 9s)

 Books of Prime Entry (also called Day Books or Journals) are where initial financial
transactions are recorded.
 Example: A small business or an M-Pesa shop records every transaction as customers
make purchases.

2. The Role of an Accountant in Recording Transactions

(12s - 79s)
 Small businesses may have a dedicated accountant or the owner may handle accounting.
 Transactions are first recorded in books of prime entry before being entered into an
accounting system.
 The accounting process:
1. Record transactions in day books (journals).
2. Post them into the accounting system.
3. Generate a trial balance, summarizing all transactions at a given time.
4. Prepare financial statements (Profit & Loss, Cash Flow Statement, Balance
Sheet).
3. Understanding Books of Prime Entry (134s - 375s)
 These books organize transactions into categories, such as:
o Sales Journal – Records all sales transactions.
o Purchases Journal – Records all goods/services bought.
o Returns Journal – Tracks items returned by customers or to suppliers.

Example: A Phone Repair Business (241s - 375s)

 Each transaction is recorded in a structured way:

o Date & Time – When the transaction happened.
o Customer Name – The person who made the purchase.
o Items Purchased – E.g., chargers, phone screens.
o Amount Paid – Cost of the item.
o Customer Contact Details – Useful for follow-ups.
 Example entry in the Sales Journal:
o May 1st, 9:10 AM – Kiprop Kibendo bought a charger for 2,500 KES.
o May 1st, 9:15 AM – Jackson Wekunda bought a battery.

4. Posting Transactions into the Accounting Ledger (378s -

419s)
 Once transactions are recorded in the books of prime entry, they are transferred to
accounting ledgers.
 The cash book records:
o Cash received from customers.
o Cash paid to suppliers.

5. Introduction to Accounting Software (422s - 532s)

 Accounting software automates transaction recording & reporting.
 Examples:
o SAP – Used by large organizations for inventory, HR, and financial reports.
o MYOB, Xero – Designed for small businesses.

6. Understanding the Trial Balance (535s - 642s)

  A trial balance is a summary of all transactions at a specific date.
 Example: A farmer's trial balance might include:
o Tractors purchased – 6 million KES.
o Irrigation system investment – 4.2 million KES.
o Buildings for storing maize – 3.3 million KES.

Key Takeaways
✅ Books of Prime Entry are the first step in accounting.
✅ Transactions are recorded in journals, then posted to the ledger.
✅ Trial balances summarize financial transactions before financial statements are prepared.
✅ Accounting software simplifies bookkeeping for both small & large businesses.

1. Introduction to Double Entry Accounting (0s - 40s)

 Double-entry accounting is the foundation of bookkeeping.
 Every transaction affects two accounts:
o One side is debited.
o The other side is credited.
 Key Rule: The system must always balance.

2. Understanding T-Accounts (45s - 124s)

 T-Accounts are used to represent ledger entries.
 Each T-Account has:
o Left side = Debit
o Right side = Credit
 Example:
o If someone gives you cash, you record a debit (increase in cash).
o If you spend cash, you record a credit (decrease in cash).
 Every transaction has both a debit and a credit.

3. The Five Key Elements of Financial Statements (128s -

372s)
 1. Assets
o What the company owns (e.g., cash, land, vehicles).
o Increase → Debit
o Decrease → Credit
o Example: A company buys inventory; debit inventory account.

An asset is a resource that a company owns or controls as a result of past events, which is
expected to generate future economic benefits.

Key Characteristics of an Asset:

✔️Controlled by the business – The company has the right to use it.
✔️Results from a past event – The asset was acquired through a transaction.
✔️Provides future benefits – Can generate revenue or be converted into cash.

Types of Assets:

🔹 Current Assets – Short-term assets expected to be converted into cash or used within 12
months.

 Examples: Cash, inventory, accounts receivable, short-term investments.

🔹 Non-Current Assets (Fixed Assets) – Long-term resources that provide benefits for
more than a year.

 Examples: Buildings, land, machinery, vehicles, patents.

2. Liabilities
o What the company owes (e.g., loans, supplier payments).
o Increase → Credit
o Decrease → Debit
o Example: Borrowing KES 5,000 from a bank; credit loan account.

A liability is an obligation that requires the company to transfer money, goods, or services to
another party in the future due to a past transaction.

Key Characteristics of a Liability:

✔️An obligation – The business must settle it through payment or service.

✔️Results from past events – The liability was created by borrowing money or purchasing
goods on credit.
✔️Leads to an outflow of resources – The company will lose cash or assets when settling the
liability.
Types of Liabilities:

🔹 Current Liabilities – Debts due within one year.

 Examples: Accounts payable, short-term loans, salaries payable, taxes owed.

🔹 Non-Current Liabilities – Debts due after more than one year.
 Examples: Bank loans, bonds payable, mortgage, lease obligations.

3. Income (Revenue)
o Money earned from selling goods/services.
o Increase → Credit
o Decrease (discounts, refunds) → Debit
o Example: Selling a calculator for KES 2,500; credit sales account.

Income (Revenue) is the money earned from selling goods, providing services, or other
business activities.

Key Characteristics of Income:

✔️Increases economic benefits – Generates cash or receivables for the company.

✔️Results from business operations – Created by selling products or offering services.
✔️Increases equity – Leads to higher business value after covering expenses.

Types of Income:

🔹 Operating Income – Earnings from the company’s main business activities.

 Examples: Sales revenue, service fees, rental income from business properties.
🔹 Non-Operating Income – Earnings from secondary activities.
 Examples: Interest income, dividends, gains from asset sales.

4. Expenses
o Costs incurred to run the business (e.g., transport, rent).
o Increase → Debit
o Decrease → Credit
o Example: Paying bus fare of KES 100 to deliver goods; debit transport
expenses.

Expenses are costs incurred to generate revenue or run the business.

Key Characteristics of Expenses:

✔️Decrease economic benefits – Reduce cash or increase liabilities.
✔️Result from business activities – Costs incurred to operate effectively.
✔️Decrease equity – Reduce profits and overall business value.

Types of Expenses:

🔹 Operating Expenses – Costs related to the business’s core operations.

 Examples: Rent, salaries, utility bills, advertising costs.

🔹 Non-Operating Expenses – Costs not directly related to core business activities.
 Examples: Interest expenses, losses on asset sales.

5. Equity (Capital)
o Owner’s investment in the business.
o Increase → Credit
o Decrease → Debit
o Example: Receiving KES 100,000 from parents to start a business; credit capital
account.

Equity is the owner’s residual interest in the business after subtracting liabilities from assets.

Formula for Equity:

Equity=Assets−Liabilities\text{Equity} = \text{Assets} - \
text{Liabilities}Equity=Assets−Liabilities

Key Characteristics of Equity:

✔️Represents owner’s investment – Capital contributed to start or grow the business.

✔️Grows with profits – Profits increase equity, while losses decrease it.
✔️Includes retained earnings – Accumulated past profits reinvested into the business.

Types of Equity:

🔹 Owner’s Capital – Initial money invested by the owner.

🔹 Retained Earnings – Profits kept in the business rather than distributed.
🔹 Shares (for corporations) – Equity raised from investors.
4. Applying Double Entry to Real-Life Scenarios (375s -
938s)
1. Asset Example

 Receiving KES 10,000 cash from parents:

o Debit Cash (Increase in asset).
 Spending KES 2,000 on goods:
o Credit Cash (Decrease in asset).

2. Liability Example

 Taking a loan of KES 5,000 from a bank:

o Credit Loan Account (Increase in liability).
 Repaying KES 500 of the loan:
o Debit Loan Account (Decrease in liability).

3. Income Example

 Selling a calculator for KES 2,500:

o Credit Sales Account (Increase in income).
 Giving a KES 200 discount:
o Debit Sales Account (Decrease in income).

4. Expense Example

 Paying KES 100 for transport:

o Debit Transport Expense (Increase in expense).
 If the conductor refunds KES 20 (overcharge correction):
o Credit Transport Expense (Decrease in expense).

5. Equity Example

 Receiving KES 100,000 capital from parents:

o Credit Capital Account (Increase in equity).
 Withdrawing KES 5,000 for personal use:
o Debit Capital Account (Decrease in equity).

5. Key Rules of Debit & Credit (911s - 944s)

Type of Account Increase (Dr/Cr) Decrease (Dr/Cr)
Assets Debit (Dr) Credit (Cr)
 Type of Account Increase (Dr/Cr) Decrease (Dr/Cr)
Liabilities Credit (Cr) Debit (Dr)
Income (Revenue) Credit (Cr) Debit (Dr)
Expenses Debit (Dr) Credit (Cr)
Equity (Capital) Credit (Cr) Debit (Dr)

 Rule to Remember: Debits = Credits at all times in accounting.

Key Takeaways
✅ Double Entry ensures accuracy: Every transaction has both a debit and a credit.
✅ T-Accounts help visualize transactions: Left = Debit, Right = Credit.
✅ Understanding Assets, Liabilities, Income, Expenses, and Equity is crucial.
✅ Learning the rules of debit & credit is essential for bookkeeping.