Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                

Topic 3 Double Entry Book Keeping8630

Download as pptx, pdf, or txt
Download as pptx, pdf, or txt
You are on page 1of 13

Double entry book keeping

By Srinivas Methuku
What do you know about double entry book
keeping?
 Introduction
 Luca De Pacioli – 1494
 Main Principle:
“Every debit has corresponding credit and
every credit has corresponding debit with equal amount”.
Definition of double entry book keeping
 “Every business transaction has a two fold effect and that
it effects two accounts in opposite directions and if a
complete record is to be made of each such transaction it
would been necessary to debit one account and credit
another account. It is this recording of two fold effect of
every transaction that has given rise to the term Double
Entry.” - By J.R. Batluboi
What are the advantages of double entry
book keeping?
 Advantages of double entry book keeping:
1. Accuracy
2. Business result
3. Complete record
4. Comparative study
5. Common acceptance
Conventional Accounting System
 This method is traditional method of recording accounting
information.
 Indian system of accounting is the example of
conventional accounting system.
Point Conventional accounting Double entry book keeping
system system
Meaning It records incomplete business This method is scientific and
transactions records complete business
transactions
Coverage It covers less details of It covers complete details of
transactions business transactions
Accuracy Arithmetic accuracy is not Arithmetic accuracy is
guaranteed guaranteed
Nature It is traditional method of It is modern method of recording
recording business transactions business transactions
Number of Only two books are prepared (1) All subsidiary books/ Journals
account books cash Book (2) Ledger and Ledgers are prepared
Recording All transactions are basically All transactions are recorded in
recorded in only Cash book different Subsidiary Books /
Journals
How can we classify the accounts?
Personal accounts: All Persons
• Natural person’s account. E.g. Natural Persons
• Artificial person’s account. e.g. Institutions
• Representative personal account. E.g. Prepaid and out standing expenses

Real accounts: All assets


• Tangible Real Account
• Intangible Real Account

Nominal Accounts:
• Expenses and losses
Classify the following accounts under Personal,
Real and Nominal Accounts:
i. Cash Account i. Printing and stationary a/c
ii. Unpaid salary account ii. Bills payable a/c
iii. Capital iii. Motor car a/c
iv. Fixtures account iv. Capital a/c
v. Bank account v. Goods destroyed by fire a/c
vi. LIC a/c
vi. Octopi account
vii. Machinery a/c
vii. Prepaid insurance account
viii. Hyderabad municipal
viii. Land and buildings account corporation a/c
ix. Loan account ix. Goodwill a/c
x. Salary account x. Repairs and maintenance a/c
xi. Goods stolen by theft account xi. Stationary a/c
xii. Copyrights account xii. Computer a/c
 State the types of two accounts involved in the following:
a. Started business with cash 50,00,000
b. Deposited cash into the bank 5,00,000
c. Purchased goods for cash 3,00,000
d. Paid rent 50,000
e. Goods sold for cash10,00,000
Basic rules of accounting

Personal accounts Real accounts Nominal accounts

Debit Debit the receiver Debit what comes in Debit all expenses
and losses

Credit Credit the giver Credit what goes out Credit all incomes
and gains
Rules of debit and credit
Assets a/c Liabilities a/c Capital a/c Revenues/ Expenses /
Gains a/c Losses a/c
Increases debit Decreases debit Decreases debit Decreases debit Increases debit
Decreases Increases credit Increases credit Increases credit Decreases
credit credit
Analysis of transactions by applying rules
of Debit & Credit
Transa Two Accounts Categorie Rules applied Account Account
ction aspects involved s debited credited
Started Cash Cash a/c Assets a/c Increase in Cash a/c
busines increases assets debited
s with Proprietor Capital Capital Increase in
cash provides a/c a/c capital Capital
funds credited a/c
Salary Salary Salary a/c Expenses Increases in Salary
paid to increases a/c expenses a/c
Akash debited
Cash Cash a/c Assets a/c Decrease in
decreases cash credited Cash a/c
Deposit Cash at Bank a/c Assets a/c Increase in Bank a/c
ed into bank asset debited
the increases
bank Cash in Cash a/c Assets a/c Decrease in Cash a/c
hand asset credited
decreases

You might also like