Double entry system of book keeping

According to double entry system of book keeping, every transaction has a two fold effect. That is, there are two aspects involved, namely, receiving aspect and giving aspect. It is denoted by debit (Dr.) and credit (Cr.). The basic principle of double entry system is that for every debit there must be an equivalent and corresponding credit and vice versa whereas under Single entry system of book keeping only one aspect of transaction namely either debit or credit is recorded. It indicates incomplete nature of records. But single entry system is easy to maintain as it does not involve computer software and it is widely used by small business enterprises. But only with the help of double entry system details regarding expenses, losses, incomes, gains, assets, liabilities, debtors, creditors, etc., are readily available. This helps to ascertain the net profit earned or loss incurred during an accounting period and also to know the financial position as on a particular date.

The following were discussed in detail in this resource:

• Meaning of single entry system
• Benefits of single entry system
• Meaning and definition of double entry system
• Principles of double entry system
• Advantages of double entry system
• Difference between single entry system and double entry system
• Accounting equation approach of recording transaction

Accounting equation followed for recording the transactions is presented below:                                                                                        

Assets = Liabilities + Capital + Revenues – Expenses

Therefore, under this approach, accounts are classified into five categories: (i) Asset account, (ii) Liability account, (iii) Capital account, (iv) Revenue account and (v) Expense account 

How to solve an accounting equation under different conditions is explained with illustrations.