BOOK-KEEPING FUNDAMENTALS

KRITHIKA G.K Asst. Professor FMS NIFT Bangalore

 Book-keeping is recording of the financial transactions of a business in a methodological manner so that information on any point in relation to them may be quickly obtained. - A.J Favell

Systems of Book-keeping:
1.

Single-Entry System Double Entry System

2.

DOUBLE ENTRY SYSTEM OF BOOK-KEEPING

1.

Every business transaction has two basic elements or aspects viz.

(i) the receiving of some benefit (receiving / incoming / debit aspect) (ii) the giving of some benefit ( giving / outgoing / credit aspect)

What it means.?

Both entries of a transaction to be made in each partys book The two entries of a transaction should be made in two different accounts The two entries of a transaction should be made in two different accounts in opposite direction or sides The two required entries should be made for equal value

Double Entry System and its

Advantages Vs Disadvantages

Advantages

Disadvantages

Complete record Authentic record Arithmetical accuracy Correct information Facilitates comparison Compliance with statutory norms

Does not disclose all errors Maintenance of too many Accounts Costly Time consuming

KINDS OF ACCOUNTS
and The Golden Rules of Accounting

Personal Accounts
a) b) c)

Natural or Physical Person Artificial or Legal Persons Representative Personal Accounts

Real Accounts
a) b)

Tangible Assets Intangible Assets

Nominal / Fictitious Accounts

a) b)

Revenue or Income Accounts Expenses Accounts

 Personal
Debit

Accounts

the Receiver & Credit the Giver

Real

Accounts
what Comes In & Credit what Goes Out

Debit

Nominal
Debit

/ Fictitious Accounts

Expenses & Losses & Credit Incomes & Gains

Alternative Rules of Debit & Credit

The

five categories of A/cs given by the American system:

Assets Liabilities Capital Incomes

& Gains Expenses & Losses

Assets

Dr. increase in an asset & Cr. decrease in an asset

Liabilities

Dr. decrease in a liability & Cr. increase in a liability

Capital

Dr. decrease in capital & Cr. increase in capital

Incomes & Gains

Dr. decrease in income & Cr. increase in income

Expenses & Losses

Dr. increase in an expense & Cr. decrease in an expense

Thank You!