04 DOUBLE ENTRY BOOKKEEPING SYSTEM

DOUBLE ENTRY BOOKKEEPING SYSTEM

1. Every business transaction has a twofold effect which affects two accounts in opposite directions
2. To make a complete record made of such transactions, one account will get debited while the other gets credited
3. This recording of the two fold effect of each transaction has given it the name double entry system

ELEMENTS OF DOUBLE ENTRY SYSTEM

1. Dual effect of transactions
2. Recording of two transactions in journal
3. posting entries to the ledger
4. balancing ledger accounts
5. preparation of trial balance
6. preparation of final accounts

PRINCIPLES OF DOUBLE ENTRY SYSTEM

1. In every business transactions there must be minimum two effects - debit and credit
2. one account is the giver of the benefit while the other is the receiver.
3. one is debited other is credited
4. every debit has an equal ad opposite credit amount

ADVANTAGES OF DOUBLE ENTRY SYSTEM

1. Complete record
2. Accuracy
3. Business results
4. commonly accepted