2. Book-keeping Fundamentals

BOOK-KEEPING FUNDAMENTALS

KRITHIKA G.K Asst. Professor – FMS NIFT Bangalore

A. ” .J Favell .“ 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.

Single-Entry System Double Entry System 2.Systems of Book-keeping: 1. .

DOUBLE ENTRY SYSTEM OF BOOK-KEEPING .

Every business transaction has two basic elements or aspects viz.1. (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 party’s 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/c’s given by the American system:  Assets  Liabilities  Capital  Incomes & Gains  Expenses & Losses .

increase in income Expenses & Losses  Dr. decrease in capital & Cr. decrease in an expense . increase in a liability Capital  Dr. decrease in a liability & Cr.Assets  Dr. increase in an expense & Cr. increase in an asset & Cr. decrease in income & Cr. decrease in an asset Liabilities  Dr. increase in capital Incomes & Gains  Dr.

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