OxfordAQA A-Level Accounting: The double entry model (9615)

This guide teaches section 3.1.3 The double entry model of the OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards. All of 3.1.3 is International AS content. The specification lists it in the content assessed by both Paper 1 and Paper 2, and the International A-level papers build on it. All amounts below are in dollars, and every business is invented.

Use it with the revision notes and the practice questions. The accounting concepts behind the adjustments are introduced in the role of the accountant guide. Course hub: OxfordAQA A-level Accounting. Tick topics off on the printable checklist, and find weak spots with a free 10-minute diagnostic.

What 3.1.3 covers

Specification statement	What you must be able to do
Using the double entry system	Record transactions from source documents in books of prime entry and ledger accounts; transfer accounts to income statements; balance accounts; prepare statements of financial position
Record adjustments in ledger accounts and financial statements	Other payables, other receivables, income due, income received in advance, irrecoverable debts (writing off and recovery), provisions for doubtful debts, depreciation charges, disposal of non-current assets, opening and closing inventory
Apply the double entry model in the preparation of financial statements	Do this for a range of business organisations
Prepare income statements and statements of financial position	Work from trial balances and additional information, for service and trading businesses
Prepare statements of financial position with subheadings	Non-current assets, current assets, equity, non-current liabilities, current liabilities
Make entries for depreciation	Straight line and reducing balance methods, in the income statement and statement of financial position

Source documents, books of prime entry and ledgers

Every entry starts with a source document. It goes into a book of prime entry, and the totals or individual items are then posted to ledger accounts.

Source document	Book of prime entry
Purchase invoice	Purchases journal
Sales invoice	Sales journal
Credit note sent to a customer	Sales returns journal
Credit note received from a supplier	Purchases returns journal
Journal voucher	General journal
Cheque counterfoil, till roll, cash receipt, paying-in slip counterfoil	Three column cash book
Bank statement (standing orders, direct debits, credit transfers, dishonoured cheques, debit card transactions, direct transfers)	Three column cash book

The general journal records items with no other book: irrecoverable debts, contra entries, disposals, depreciation, corrections and opening entries.

Ledger accounts are subdivided into the receivables ledger (one account per credit customer), the payables ledger (one per credit supplier) and general ledger accounts (everything else: sales, purchases, expenses, assets, capital).

Every transaction has an equal debit and credit. Debit an increase in an asset, expense or drawings. Credit an increase in a liability, income or capital.

Balancing an account. Add both sides. Put the difference on the smaller side as “Balance c/d” so the two totals match. Bring it down on the opposite side as “Balance b/d” on the first day of the next period. Income and expense accounts are not carried down. Instead, the year’s figure is transferred to the income statement.

The three column cash book

The three column cash book has discount, cash and bank columns on each side. Discounts allowed go in the debit-side discount column; discounts received go in the credit-side one. The discount columns are memorandum totals. They are not balanced. At the period end their totals are posted to the Discounts allowed account (debit) and the Discounts received account (credit).

Worked example 1

Ravelstone Garden Supplies starts May with cash 380 and bank 2,150. In May:

• 4 May: Halvorsen, a credit customer owing 1,200, pays by cheque less 2.5% cash discount.
• 9 May: pays Brightmoor Seeds 840 by cheque less 5% cash discount.
• 15 May: cash sales 610 (till roll).
• 20 May: standing order for insurance 95 (bank statement).
• 28 May: wages 420 paid in cash.

Dr                        Disc  Cash   Bank | Cr                        Disc  Cash   Bank
1 May  Balance b/d               380  2,150 | 9 May  Brightmoor Seeds     42          798
4 May  Halvorsen            30        1,170 | 20 May Insurance                         95
15 May Sales                     610        | 28 May Wages                     420
                                            | 31 May Balance c/d               570  2,427
                            30   990  3,320 |                             42   990  3,320
1 Jun  Balance b/d               570  2,427 |

Discount allowed: 1,200 × 2.5% = 30, so the bank receives 1,170. Discount received: 840 × 5% = 42, so the cheque is 798. Halvorsen’s account is credited with both 1,170 and 30, clearing the full 1,200.

Trade and cash discounts

A trade discount is a reduction from list price for trade customers. It is never entered in a ledger: the invoice shows the net figure, and that is what is recorded. A cash discount is given for prompt payment. It is recorded when payment is made.

Ravelstone buys mowers on credit with a list price of 3,200, less 15% trade discount, and 2.5% cash discount for payment within 14 days.

• Invoice value: 3,200 × 85% = 2,720. Purchases journal: debit Purchases 2,720, credit the supplier 2,720.
• Paid within 14 days: discount received 2,720 × 2.5% = 68, cheque 2,652. Debit the supplier 2,720; credit Bank 2,652 and Discounts received 68.

Capital and revenue items

Category	Meaning	Examples
Capital expenditure	Buying or improving non-current assets, including costs of getting them ready for use	Delivery van; legal fees on buying premises; fitting a new machine
Revenue expenditure	Day-to-day running costs and maintaining assets	Fuel, repairs, wages, repainting
Capital income	Money received that is not from normal trading	Capital introduced, loan received, proceeds of selling a non-current asset
Revenue income	Income from normal operations	Sales, rent received, commission received

Capital expenditure goes to the statement of financial position and is depreciated. Revenue expenditure is charged against profit in the income statement for the year. Getting this wrong misstates both profit and assets.

Irrecoverable debts, recovery and contra entries

Write-off. Customer D. Mensah owes 640 and cannot pay. Debit Irrecoverable debts 640; credit D. Mensah 640. The expense goes to the income statement.

Recovery. If Mensah later pays the 640, first reinstate the debt: debit D. Mensah 640; credit Irrecoverable debts recovered 640 (income). Then record the cash: debit Bank 640; credit D. Mensah 640. Reinstating first keeps a record that the customer did pay.

Contra. Ravelstone owes Orrin Timber 1,350 and Orrin owes Ravelstone 900. Set off the smaller amount: debit Orrin Timber (payables ledger) 900; credit Orrin Timber (receivables ledger) 900. Ravelstone now owes Orrin 450.

Depreciation

Straight line: (cost − residual value) ÷ useful life. A delivery van costing 27,500 with residual value 3,500 and a six-year life: (27,500 − 3,500) ÷ 6 = 4,000 a year.

Reducing balance: rate × carrying amount at the start of the year. Equipment costing 16,000 at 25%: year 1 = 4,000; year 2 = 25% × 12,000 = 3,000; carrying amount after two years 9,000.

Double entry: debit Depreciation (income statement expense); credit Accumulated depreciation. In the statement of financial position, show cost less accumulated depreciation equals carrying amount.

Disposal of non-current assets

The equipment above is sold at the start of year 3 for 8,600 (no depreciation in the year of sale).

Disposal account
Dr Equipment (cost)             16,000 | Cr Accumulated depreciation   7,000
                                       | Cr Bank                      8,600
                                       | Cr Income statement (loss)     400
                                16,000 |                             16,000

Carrying amount 9,000 − proceeds 8,600 = loss on disposal 400, charged as an expense. A profit on disposal would appear on the debit side and be added to gross profit as income.

Other payables, other receivables, income due and income received in advance

Adjustment	Income statement	Statement of financial position
Expense owing (other payable)	Add to expense	Current liability
Expense paid in advance (other receivable)	Deduct from expense	Current asset
Income due (not yet received)	Add to income	Current asset
Income received in advance	Deduct from income	Current liability

Worked example 2

• Electricity paid 2,310 in the year and 280 owing at the year end: expense 2,590, other payable 280.
• Commission received 1,940 and 160 still due: income 2,100, current asset 160.
• Rent received from a subtenant 3,900, of which 300 is for next year: income 3,600, current liability 300.

In the electricity ledger account, the 280 appears as Balance c/d on the debit side, the 2,590 transfer to the income statement on the credit side, and the 280 comes down as a credit balance b/d.

Opening and closing inventory

Cost of sales = opening inventory + purchases − purchases returns − closing inventory. Closing inventory is a current asset at the year end and becomes next year’s opening inventory. Service businesses have no cost of sales, so their income statement starts with fees or revenue and deducts expenses.

Preparing financial statements from a trial balance

Worked example 3

Kestrel Lane Hardware, a trading business, has this trial balance at 31 March 2026.

Account	Dr	Cr
Revenue		148,600
Sales returns / Purchases returns	1,900	1,300
Purchases	86,400
Inventory 1 April 2025	9,800
Wages / Rent / General expenses	23,500 / 7,200 / 4,150
Discounts received		620
Shop fittings at cost / Accumulated depreciation	30,000	9,000
Trade receivables / Provision for doubtful debts	11,200	280
Trade payables		8,450
Bank / Cash	3,640 / 210
Bank loan (repayable 2031)		12,000
Drawings / Capital	15,000	12,750
Totals	193,000	193,000

Additional information: closing inventory 10,600; rent owing 600; general expenses include 350 of insurance paid in advance; depreciate fittings at 20% reducing balance; write off an irrecoverable debt of 400, then make the provision for doubtful debts 3% of remaining receivables.

Workings: depreciation 20% × (30,000 − 9,000) = 4,200. Receivables 11,200 − 400 = 10,800; provision 3% × 10,800 = 324, an increase of 324 − 280 = 44.

Income statement for the year ended 31 March 2026
Revenue (148,600 - 1,900)                              146,700
Cost of sales (9,800 + 86,400 - 1,300 - 10,600)        (84,300)
Gross profit                                            62,400
Discounts received                                         620
                                                        63,020
Expenses: wages 23,500; rent 7,800; general 3,800;
depreciation 4,200; irrecoverable debts 400;
increase in provision 44                               (39,744)
Profit for the year                                     23,276

Statement of financial position at 31 March 2026
Non-current assets
  Shop fittings: cost 30,000 less depreciation 13,200   16,800
Current assets
  Inventory 10,600; trade receivables 10,800 less
  provision 324 = 10,476; other receivables 350;
  bank 3,640; cash 210                                  25,276
Current liabilities
  Trade payables 8,450; other payables 600              (9,050)
Non-current liabilities
  Bank loan                                            (12,000)
Net assets                                              21,026
Equity
  Capital 12,750 + profit 23,276 - drawings 15,000      21,026

Net assets equal equity, so the statement balances.

Common errors

• Recording a trade discount in the ledger. Only the net invoice value is recorded.
• Leaving the discount columns of the cash book unposted, or posting them to the wrong side.
• Charging the whole new provision for doubtful debts to the income statement instead of the change in it.
• Calculating reducing balance depreciation on cost instead of the carrying amount.
• Showing income received in advance as a current asset. It is a liability: the business owes the service.
• Forgetting to deduct the irrecoverable debt from receivables before calculating the provision.
• Putting drawings in the income statement. Drawings reduce equity only.

Next steps

Condense this with the revision notes, then try the practice questions. Exam technique is in the OxfordAQA A-level Accounting exam preparation guide.

Official syllabus

OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards, published by OxfordAQA. Section 3.1.3 The double entry model.