Double Entry System of Accounting
Double entry organisation of accounting is based on the dual seem concept. It includes 2 aspects, they are Debit aspects as well as Credit aspects.
Debit Aspects- This includes either Receiving aspects, incoming aspects or Expenditure aspects, these are known every bit Debit aspects.
Credit Aspects- The unopen to other aspects may last Giving aspects, outgoing aspects or income aspects. These are known every bit Credit aspects.
Stages of Double Entry System
There are 3 distinct stages are includes a consummate organisation of double entry.
i) Recording of transactions inwards the journal.
ii) Posting of magazine entry inwards to the respective ledger accounts as well as and thus preparing a lawsuit balance.
iii) Closing of books of accounts as well as preparing concluding accounts.
Rules for Double Entry System
An describe of piece of occupation concern human relationship is tilt as well as it is a tape of transactions relating to a person, or a firm, or a property, or a liability, or an income or expenditure. There are 3 kinds of rules for double entry system. They are every bit follows:-
1. Personal Accounts
Under this statement, a divide describe of piece of occupation concern human relationship volition last prepared for each person. It includes Natural peron’s account, Artificial person’s describe of piece of occupation concern human relationship as well as representative personal accounts. Some of the examples of personal describe of piece of occupation concern human relationship are Ramu’s account, Bank account, Any firms account, whatsoever companies account, prepaid expense account, outstanding reward describe of piece of occupation concern human relationship etc.
Rule for personal Account:-
“Debit the receiver
Credit the giver”
2. Real Accounts
Under the existent account, a divide describe of piece of occupation concern human relationship volition utilization for each bird of belongings or asset. There volition direct hold an describe of piece of occupation concern human relationship relating to a property, an asset or a possession of property. Some of the examples for existent describe of piece of occupation concern human relationship are Cash account, Furniture account, Goodwill describe of piece of occupation concern human relationship etc.
Rule for Real Account:-
“Debit what comes inwards
Credit what goes out”
3. Nominal Account
These includes the expenses as well as losses or incomes as well as gains of business. Some of the examples of Nominal describe of piece of occupation concern human relationship are reward account, discount received account, involvement describe of piece of occupation concern human relationship etc.
Rule for Real Account:-
“Debit all expenses as well as losses
Credit all incomes as well as gains”
Advantages of Double entry system
The of import merits of Double entry organisation are every bit follows:-
1. Under Double entry system, keeps a consummate tape of describe of piece of occupation concern transactions.
2. This provides consummate data regarding the business.
3. This has the facility of checking mathematical accuracy of books of accounts.
4. It reveals the lucre or loss of the describe of piece of occupation concern for a given period.
5. This enables the describe of piece of occupation concern homo to plan, command as well as bring necessary actions inwards his operations.
6. It avoids chances of fraud or misappropriation of accounts.
7. This organisation is flexible according to the nature of business.
8. This organisation is accepted past times the revenue enhancement authorities.
9. Actual cyberspace lucre tin mail away last calculated directly.
Disadvantages of Double entry system
The of import limitations of Double entry organisation are every bit follows:-
1. It is non suitable to break all the data of a transaction which is non properly recorded inwards the journal.
2. If in that place is whatsoever errors inwards the transactions recorded inwards the books, it is hard to detecting the errors.
3. This organisation required to a greater extent than clerical labour.
4. If in that place is whatsoever compensatory errors, it is non suitable to discover out past times this system.
These all are the Advantages as well as Disadvantages of Double entry organisation of accounting.
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