Double Entry Accounting System

Topics
Double Entry Accounting
System-What it is?
Cash and Accrual based
Accounting
Concept of Debit and Credit
Revenue & Capital
 Accounting definitions.
What is Accounting?

Accounting is an art of
recording ,classifying
and summarizing the
financial information in
a significant manner.
 Single Entry System
 Under this system both the
aspects of transaction are not
recorded.
 Only Personal accounts & cash
book are opened.
 Under this system balance
sheet is not prepared.
This system is therefore not
considered as an authentic one.
 Double Entry Accounting
System
Based on principle of duel aspect of
each transaction.
For correct presentation both of
them should be recorded.
Requires maintenance of records of
assets, liabilities, revenues and
expenditure.
Impact of each transaction can be
seen or measured.
Total assets are equal to total
equities.
Classification of Accounts

 Personal Account

 Real Account

Nominal Account
 Personal Account
Definition & Examples of
accounts:-
 Personal Account: Personal
accounts are accounts
relating to persons or
organisations with whom the
business has transactions.
E.g Customer, Supplier,
Money lenders etc.
 Real Accounts
• Real Accounts: Real
accounts refer to
accounts in which
property and possession
are recorded.
E.g Land, Building, Plant &
Machinery, Vehicle Cash,
Bank etc.
Nominal Accounts

 Nominal Accounts:
Nominal accounts are
revenue, expenses,
gains, and losses.
E.g. Wages, Salary,
Discount etc .
 Concept of Debit &
Credit(Golden Rules)
 For Personal Accounts :Debit
the receiver and credit the giver.
E.g. Furniture has been
purchased from Godrej & Boyce
Ltd on credit of Rs.2,00,000/-

Journal Entry:
Furniture A/C Dr. Rs.2,00,000/-
To Godrej & Boyce Ltd Cr. Rs.2,00,000/-
 Concept of Debit & Credit
(Golden Rules)
• For Real Accounts: Debit what
comes in and credit what goes
out.
A vehicle has been purchased
of Rs. 8,00,000/- by cheque.
Journal Entry:
Vehicle A/C Dr. Rs.8,00,000/-
To Bank Cr. Rs.8,00,000/-
 Concept of Debit & Credit
(Golden Rules)

• For Nominal Accounts: Debit

all expenses (and loses) and
Credit all incomes(and gain).
E.g Telephone bill amounting to
Rs.25,000/- paid by cheque.

Telephone Expense A/c Dr. Rs.25000/-

To Bank A/c Cr. Rs. 25000/-
Double Entry Accounting
System classification
 Cash Based :- Cash basis of
accounting is a method of accounting
in which transactions are recorded
in the books of account when cash is
actually received or paid out.
Eg .Property Tax has been received of
Rs.10,000/-
Cash A/C Dr Rs.10,000/-
To Property Tax Cr. Rs.10,000/-
 Accrual Based
Accrual Based:- Accrual basis of
accounting is an accounting system
which recognises revenues and
expenses as they are earned or
incurred , not as cash received or paid
respectively.
Eg .Raised demand and sent
Property Tax bills of Rs.10,000/- on
10th May2014 and the same amount
has been received against the demand
on 30th May,2014.
 Accrual Based
10.05-2014

Property Tax Receivable A/C Dr 10,000/

To Property Tax A/C Cr. 10,000/-

30-05-2014
Cash/Bank A/C Dr 10,000/-
To Property Tax Receivable A/C Cr 10,000/-
 Accrual Based
 A)Received a bill for construction of road from
NBCC Ltd for Rs.10,00,000/-(Bill Processed and
deductions made Security Money
Rs.1,00,000/-,TDS Rs.50,000/- ,TVAT
1,20,000,labour Cess Rs.10,000/-) on 30 th
May,2014.
 B)Paid Rs.7,20,000/- to NBCC Ltd on 3 rd June,2014.

30-05-2014
Roads A/C Dr 10,00,000/-
To, Security Money 1,00,000/-
To, TDS, Income Tax 50,000/-
To, TVAT 1,20,000/-
To, Labour Cess 10,000/-
To, NBCC Ltd 7,20,000/-
3-06-2014
NBCC Ltd A/C Dr 7,20,000 /-
To, Bank 7,20,000/-
 Capital and Revenue
Expenditure

Capital expenditure is the

expenditure where the benefits are
not fully consumed in a year but
spread over several years.

Revenue Expenditure is the

expenditure which provides benefits
in the current accounting year only.
It can not be forwarded to next year
or years.
 Primary Accounting
Documents
• Following primary accounting
documents have to be maintained:
 Receipt Vouchers
 Payment Vouchers
 Fund Transfer Vouchers/Contra
Vouchers.
 Journal Vouchers
 Primary Books of Accounts
Before preparation of Financial
Statements we have to prepare
following primary books of
accounts:
 Cash book
 Bank book ( incl. Bank
Reconciliation Statement)
 Journal book
 Ledger
 Trial Balance
 Financial Statement

 Receipts & Payments

Statement.

 Income & Expenditure

Account.

 Balance Sheet.
 Why the Financial
Statement is mandatory for
ULB.

• To know the actual

position of the assets,
liabilities and reserve of
the ULB.
• Shows the position of
general fund of ULB.
 Receipts & Payments Account.

Receipts Amount(Rs Payments Amount(

) Rs)

To Balance b/d By Salary 3,00,000

1,00,00,000

To Share of 1,00,00,000 By Wages 1,00,000

Taxes(SOT)
To TUEP 50,00,000 By Electricity 50,000
Expenses
To Property Tax 5,00,000 By Fuel 10,00,00
0
To Water Tax 6,00,000 By TUEP 13,00,00
0
By Balance c/d 2,33,50,0
00
2,61,00,000 2,61,00,0
00
 Income & Expenditure Account

Expenditure Amount(R Income Amount(Rs

s) )

To Salary 10000 By Property Tax

1,00,000
Wages 5000 Add-Outstanding 1,50,000
50,000
Printing & 3000 By Water Tax 30,000
Stationery

Interest 5000 By Profit on sale 20,000

of
refreshment(50,0
00-20,000)
Insurance 1000

Excess of Income 1,86,000

over Expenditure

2,00,000 2,00,000
 Balance Sheet.

Liabilities Amou Assets Amoun

nt t

Capital Fund Rs.

10,00,00,000

Less: Excess of 8,14,000 Furniture 5,00,000

Income over Exp. Rs.
1,86,000

Loan from HUDCO 1,00,000 Cash in Hand 10,000

Outstanding Rent 20,000 Cash at Bank 3,29,000

Subscription received 5,000 Stock 1,00,000

in advance

9,39,000 9,39,000
Thank You