Double Entry System of Bookkeeping | Meaning | Advantages | Features

 

 

Double Entry System of Bookkeeping

According to double entry system of bookkeeping, every financial transaction affects two sides.

One is debit and another is credit.

Debit transactions are recorded in left hand side and credit transactions are recorded in right hand side.

Different financial transactions are classified into personal account, real account and nominal account.

 

In personal account:	In real account:	In nominal account:
Receiver                    Dr	What comes in                    Dr	Expenses or loss                  Dr
Giver                          Cr	What goes out                    Cr	Income or profit                 Cr

 

 

 

 

Example: Manoj started business with cash Rs 200,000.

Here, Manoj is personal account.

His capital is also personal account; it is credited.

Cash is real account; it is debited.

 

Journal Entry

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash account	Dr		200,000
	To Manoj’s capital account				200,000
	(Being: business started with cash)

 

It means under double entry system of bookkeeping:

Every transaction has two effects. One is debit and other is credit.

In this system, both receiving and giving (debit and credit) aspects are recorded.

It is the most modern, progressive, scientific and best system to recording financial transactions.

 

 

Definitions  of double entry system of bookkeeping

According to Oxford Dictionary, “Double entry system is keeping financial records in which each piece of business is recorded as a credit in one account and a debit in another.” According to R Lewis, “The specific technique which reflects the concept of duality is known as double-entry bookkeeping.”

 

 

Keep in Mind (KIM)

Debit is taken from Italian ‘debito’ means owed to the proprietor. Credit is taken from Italian ‘credito’ means owed from the proprietor. Book means memorandum, journal and ledger. There are three types of accounts i.e. personal account, real account and nominal account. The details of these accounts are given in chapter 3 (Journal Entry)

 

 

Advantages of Double Entry System | Importance of Double Entry System

There are many advantages of double entry system of bookkeeping; out of them, some advantages are as follow:

Complete system

Double entry system is a complete system of bookkeeping.

It records not only each and every financial transaction but also feature of each transaction.

More than 180 countries use double entry system of bookkeeping.

 

Systematic system

A systematic technique is followed in recording financial transactions in double entry system of bookkeeping.

Financial transactions are recorded in a systematic and chronological order with suitable narration.

 

Scientific system

The double entry bookkeeping system of bookkeeping is a scientific system.

It has its own set of principles and rules.

Under those principles and rules, two aspects of every financial transaction are recorded i.e. debit and credit.

 

Ensures arithmetical accuracy

Double entry bookkeeping system is based on the double entry principle which means ‘for every debit amount matching credit amount’.

Therefore, it helps to ensure arithmetical accuracy of financial transactions.

 

Ascertaining profit and loss

This system helps to calculate the true profit or loss of a business.

To find out profit or loss, income statement is prepared for a given period.

 

Financial position

Double entry bookkeeping system also helps to find our financial position of the business.

To know financial position, balance sheet is prepared for a given period.

 

 

Click on the photo for FREE eBooks

 

 

Features of Double Entry System of bookkeeping  | Characteristics of Double Entry System of bookkeeping

The double entry bookkeeping system is a scientific system of keeping the record of financial transaction; the main features are:

Universal rules

Double entry system is the perfect accounting to record financial transactions.

This system is applied by more than 180 countries in the world.

 

Classification of accounts

Under double entry system of bookkeeping, accounts are classified into personal, real and nominal.

In personal account, it shows name of person and firm.

In real account, it shows transactions of different assets.

In nominal account, it shows expenses and incomes.

 

Two fold effects

Under double entry system of bookkeeping, every monetary transaction has two fold effects; one is debit and another is credit.

In personal account, one is receiver and another is giver.

In real account, one is comes in and another is goes out.

In nominal account, one expenses and another is income.

 

Change in ownership

Under this system, ownership will be transferred from one person to another.

Because there are two effects one is receive and another is giver.

Financial transactions are either in cash or on credit.

 

Separate entity

Under this system, business and business person are separate.

Business and its owner are treated as a separate from each other.

Business expenses are part of business expenses.

Expenses of owner are part of drawings.

 

###########

Click on link for YouTube videos CHAPTERS OF CLASS 11

 

ACCOUNTING EQUATION  http://tiny.cc/c89jkz

BASIC JOURNAL ENTRIES IN NEPALI http://tiny.cc/uaakkz

BASIC JOURNAL ENTRIES http://tiny.cc/8aakkz

JOURNAL ENTRY AND LEDGER http://tiny.cc/caakkz

LEDGER http://tiny.cc/haakkz

SUBSIDIARY BOOK http://tiny.cc/399jkz

CASH BOOK http://tiny.cc/889jkz

TRIAL BALANCE & ADJUSTED TRIAL BALANCE http://tiny.cc/c59jkz

BANK RECONCILIATION STATEMENT (BRS) http://tiny.cc/q59jkz

DEPRECIATION http://tiny.cc/ugakkz

FINAL ACCOUNT: CLASS 11 http://tiny.cc/y89jkz

ADJUSTMENT IN FINAL ACCOUNT http://tiny.cc/keakkz

CAPITAL AND REVENUE http://tiny.cc/peakkz

SINGLE ENTRY SYSTEM http://tiny.cc/n19jkz

NON-PROFIT ORGANIZATION (NON-TRADING CONCERN http://tiny.cc/j09jkz

GOVERNMENT ACCOUNTING http://tiny.cc/hcakkz

GOSWARA VOUCHER (JOURNAL VOUCHER) http://tiny.cc/hcakkz

 

###########

***********

Thank for investing your time.

Please comment on article..

You can help me by sharing this article at your social media platform.

 

Jay Google, Jay YouTube, Jay Social Media

जय गूगल, जय युट्युब, जय सोशल मीडिया