Chapter 1. Questions answered.

Question 1.

What is double entry accounting? Why do we put everything in twice?

Double entry accounting is based the duality principal.  For every transaction, there are two actions within the business.  For example, if a business purchases a coffee machine, it is both an increase of assets (debit) and a decrease in expense (credit).
There are two sides to every coin.  A business is both an entity with its own purpose as is its owner/s.  Double entry accounting is used to ensure every transaction is recorded in its appropriate place.


Question 2.

Three Assets:
Mining Equipment (this can be hired out or used with staff to make earnings).
Maintenance Plants which facilitate income as repairs are carried out within.
Subsidiary companies which operate other facets of business (rail, infrastructure etc.) which then create a whole of business cycle for the Downer Group.

Three Liabilities:
Salaries to workers.  Downer Group employs over 10,000 people.
Workcover Claims and or law suits (the company deals with various safe workplace issues due to the nature of business).
Bank loans to cover costs and new ventures.  It's annual report states the company has various debts.

Three Items of Equity:
The total of all assets less any debt still owing on them.  Downer owns equipment for various facets of business, were this to be sold, it would produce equity for the owners.
Revenue generated from business (less debts)
Downer Group Company itself is equity.  If the business were sold and was valued at 1million but owed 0.5million, the equity would be 0.5million.


Please feel free to comment as necessary.