DOUBLE ENTRY BOOK KEEPING SYSTEM

SUBMITTED BY

KASHISH CHHABRA
DIV-B
PRN. NO.- 18010224080
CLASS BBA-LLB

OF

SYMBIOSIS LAW SCHOOL NOIDA

IN
AUGUST, 2018

UNDER THE GUIDANCE OF

DR. MEENAKSHI KAUL

I hereby declare that the case entitled “Double Entry Book keeping system” submitted for the
Symbiosis Law School, NOIDA for Business Accounting is my original work and the
project has not formed the basis for the award of any degree, fellowship or any other similar
titles.

Signature of the Candidate

Date
 CERTIFICATE

The case entitled “Double Entry Book keeping System” submitted to the Symbiosis Law
School, NOIDA FOR Business Accounting as part of Internal Assessment is based upon on
my original work carried out under the guidance of Dr. Meenakshi Kaul from July to august.
The research work has not been submitted elsewhere for award of any degree.

The material borrowed from other sources and incorporated in the research work has been
duly acknowledged.

I understand that I myself could be held responsible and accountable for plagiarism, if any,
detected later on.

Signature of the candidate

Date
 ACKNOWLEDGEMENT

I would like to express my thanks of gratitude to my teacher Dr. Meenakshi Kaul as well as
Director sir, Dr. Prof. C.J. Rawandale who gave me this golden opportunity to do this
wonderful project on the topic “Double Entry Book keeping System”, which also helped me
in doing a lot of research and I came to know more about so many new things I am really
grateful for.

Secondly, I would also like to say thanks to my friends who helped me in this research
project within a limited time frame.
Introduction

Double entry bookkeeping system has been named since the entries consists of opposite in nature to the
different account and each and every single transaction has two entries. It has two entries which come under
as Debit and Credit. Debit comes at left hand side whereas credit comes at right hand side. For instance, it is
a entry as Ram started a business with 500Rs. So the entry would be Cash Account debit to Capital Account
credit. And it is mandatory that debit entries should be equalizes to credit entries, so to detect the correct
entries we have the accounting equation that is Assets= Equity+ Liabilities. And it should be satisfied by the
entries that one made so that the ledger will be balanced.
It provides the most accurate data since it makes all records in a very methodological way.
History

Locus Pacioli and his friend Leonardo da Vinci, who were Italian and have written the first book on Double
Entry Book keeping System. It is considered the best and universally accepted book for the accounts. It led
to the foundation of modern accountancy since it has well defined principles. The book was titled as
“Summa de arithmetica, geometria, proportioni et proportionalita” and it was published in 1494 in Venice.
They were not known to be an inventor of double entry system but they explored the principles and methods
of accounting principles. Pacioli had written the text and Vinci made up the illustrations of the text given by
him. It was being divided into many parts and in which double entry falls which was named as “Particularis
de computis et scripturis” and there were many different chapters like Journals, Balance sheet, Ledgers,
Cash book, trial balance etc.
By this work, Pacoili was known to be as “Father of accounting” since the work was already invented but
not was in the practice and after that book in Europe and the other trading countries he was being
acknowledged as the above title.
Classification

The system is classified into three broad categories or stages that are Original records which are journals;
classification which are ledger accounts; and the summary which are the loss and profit holds by the
company.
Firstly, when the transactions are recorded and where there have been recorded that is a book known as a
journal which can be further classified as purchase journal, cash journal, sales journal according to the
transactions. In the next stage, when all the transactions are being recorded and then an account is being
opened where all the transactions of the same person has placed and the book in which this account is
located is called ledger. Lastly, when the ledger accounts are completed then they are balanced and a
statement is called trial balance which summaries the loss and profit of the business. Hence we can infer that
financial positions of any business can be known by double entry system with less chances of making errors
since once a balance sheet is matched with all the entries then one has made correct entries and journalised
and ledgerized accurately.
Advantages and Disadvantages

As the coin has two faces, the system has two faces that are advantages or merits and disadvantages or
demerits. When we use double entry system, we have so many advantages that are the entries have been
recorded in two separate accounts as one is debiting and other will be credit surely. So the chances of
making errors, frauds have been reduced to an extent. It is the most efficient way of keeping records and a
company can look upon his financial positions by just flipping through the pages and even it can look over
other companies’ status as well. Its highly methodological or sophisticated that one can know about the
transactions and find the information in them in a very less span of time. It is universally accepted system
and it is needed by the accounting standards and law and if the company fails to give those requirements
then the auditors of the company would not accept the income status. Hence, we can say that it is a system
which acquires less time and gives better results and prevent the company from frauds too. But there are
disadvantages too that are listed as all cannot handle the transactions and look upon the status so the
company has to hire employees and hence it is very costly to hire the employees and it has been standardized
so the manual and computerized accounts are almost same in the format so the people should know the
accounting.
In this system, at least two entries are required to record a single transaction. It may be as asset, liability,
expense, equity, revenue accounts. It should be total debits to total credits for all of the accounts in the
transactions. Entries are recorded in the “Books of accounts".
Types of Accounting
Traditional Approach
There are two different types of accounting that are traditional approach and modern approach. Traditional
approach is also known as British approach and accounts are classified into nominal, real and personal
accounts. Personal accounts are the accounts which are relating to persons that are individuals, creditors,
debtors etc. Example of these accounts is Shyam and Co., a customer that is a debtor. The main purposes of
these accounts are to know the balance which is due to or due from persons or organisations. These are
categorised into three that are Natural personal accounts, Artificial Personal accounts, Representative
personal accounts. Real accounts are accounts which are related to tangible or intangible assets of the firm.
Examples are furniture, land, building, goodwill, trademarks etc. Nominal accounts are those accounts which
are related to expense, losses, gains, revenue etc. examples of these accounts are Salary account, purchases
account etc.
In the transactions the golden rule is applicable when one does by traditional approach. And the golden rule
is related to debit and credit and the golden rules are, Real account: Debit what comes in and credit what
goes out. Personal account: Debit the receiver and credit the giver. Nominal account: Debit all expenses &
losses and credit all incomes & gains.
Modern Approach
There is also one way of accounting that is Modern Approach of Accounting in which it has been
categorized into five categories. First is assets accounts which are related to the economic resource of an
enterprise. Examples are Furniture, Plant and Machinery, Bank and Cash etc. Rule for Debit and credit is
Debit the increase and Credit the decrease. Second one is Liability accounts which are related to who are
lenders or creditors or who owe liability to others. In this rule for Debit and Credit is Debit the decreases and
Credit the Increases. Third one is capital accounts which are the accounts of partners who invested some
amount in the business. Rule of debit and Credit is Debit the increases and Credit the decreases. Fourth one
is Revenue accounts which are accounts of incomes and gains. Examples are of these accounts are interest
received, bad debts recovered etc. In this the rule of debit and credit is Debit the increases and Credit the
decreases. Last one is Expense account in which the accounts are of expenses or losses which are present in
the business. Examples of these are Purchases, wages etc. In this the rule of debit and credit is debit the
increases and credit the decreases. Both debit and credit entries represent increase or decrease depending on
the account’s nature.
After a month or year, it might be necessary to carry on the balance so it is basically the difference of the
total of the both the sides that is debit and credit sides. If the debit side is more than the credit side then it is
termed as debit balance and if the credit side is more than the debit side then it is termed as credit balance. If
the credit side is lesser than the debit side then the net amount which is less it is put on the credit side as the
entry “Balance c/d” in particulars side and in debit side it is written as “Balance b/d” in particulars side and
vice versa.
After recording entries in a journal, they are being posted in the numerous accounts which are separate
accounts of each transaction and those accounts are being recorded in a book and then the book is called a
Ledger. It is called “Books of final entry”. It shows the current balance of the accounts. From this, one can
prepare trial balance and can spot errors in the journal entries. It provides whole information about the
business transactions. One can get the information about income and expense. The process of transferring
the journal entries to the ledger accounts is called posting. It shows how the transaction changes and
transferred into another ledger accounts. Its balancing is same as balancing the journal entries.
After posting transactions in ledger accounts, the statement is being prepared in which debit and credit sides
are shown separately and the statement is called Trial Balance. If the debit and credit side’s balances then
one has made journal entries and posted them into ledger accurate. It is based upon the Dual Aspect Concept
which states that each debit side corresponds to equal credit sides.
When the business transactions are many then it becomes difficult for one to record all the transactions and
make journal entries. Resolving this issue, Journal Book is divided into many Subsidiary Books named as
Cash book, Purchases Book, Sales Book, Purchases return Book, Sales Return Book, Journal Proper.
Subsidiary books are advantageous as they divide the work, the work is reduced and one can complete
transactions in a very short span of time. And separate book is prepared so one can get the information easily
without looking into many journal books.
The subsidiary book which we discuss in this research project is Cash book. In cash book, cash transactions
are done as in any firm cash transactions are many in number, so it is relevant to maintain a cash book. The
entries are being recorded in a chronological order. Only cash and bank transactions are being recorded in
the Cash book. Receipts are recorded on the left hand side that is of debit side and payments are recorded on
the right hand side that is of credit side. It has one advantage over others that it performs the function of
Journal and Ledger simultaneously. That is how one can save his time while making the cash book. And the
balance is directly gets transferred to Trial balance and it’s a part of ledger too. So, Cash book is both a
Principal Book and Subsidiary Book. There are three types of Cash book, i.e. Single Column which records
cash transactions only. And Double column which records cash and bank transactions. In this the rule of
debit and credit are increase in assets are debited and decrease in assets are credited since cash account is an
asset.
Conclusion and Limitation
So, we can conclude this here by saying that double entry book keeping system is very efficient way to make
transactions than single entry book keeping system as it makes one’s work easier and one can do in lesser
time.it has many advantages over single entry book keeping system. And in traditional and modern approach
it is quite easy to follow the modern approach as it scratches the whole concept and one can make lesser
mistakes. The limitations of the study are that researchers found it difficult for people to memorize the
golden rules and the rules of debit and credit. The accuracy of the study is based upon the theoretical aspect.
This study is being made in a particular geographical region.
Future Scope
The future scope of this study to research on other subsidiary books and to make research more on modern
approach and to make this research more practical than theoretical.
Bibliography
 Double entry Book keeping System, T.S. Grewal (2018 Edition) (CBSE Class XI)
 http://www.accountingexplanation.com/double_entry_system.htm
 https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system