the giving of the same value on the other. This two fold nature in all transactions must be recorded in the books and this gives rise to the term Double Entry Book keeping”. – Munro and Palmer “Every business transaction has a two-fold effect and that it affects two accounts in opposite directions and if a complete record is to be made of each such transaction it is 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”.
– J.R Batliboi . . Principles of double entry system Following are the principles of double entry system: (i) In every business transaction, there are two aspects. (ii) The two aspects involved are the benefit or value receiving aspect and benefit or value giving aspect.
(iii) These two aspects involve minimum two accounts; at least one debit and at least one credit. (iv) For every debit, there is a corresponding and equivalent credit. If one account is debited the other account must be credited. .
. Advantages of double entry system Following are the advantages of double entry system: (i) Accuracy In this system, the two aspects of each transaction are recorded in the books of accounts. This helps in checking the accuracy in accounting. Accountancy - (ii) Ascertainment of business results 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. (iii) Comparative study The business results of the current year can be compared with those of the previous years and also with other business firms. It facilitates business planning for future. (iv) Common acceptance The business records maintained under this system are accepted by financial institutions, government and others, because it is a systematic and scientific system.
. Transaction Transaction involves transfer of money or money’s worth (goods or services or ideas) from one person to