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
To Property Tax A/C Cr.
10,000/
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 30th
May,2014.
 B)Paid Rs.7,20,000/- to NBCC Ltd on 3rd
June,2014.
30-05-2014
Roads A/C Dr
To, Security Money
To, TDS, Income Tax
To, TVAT
To, Labour Cess
To, NBCC Ltd
10,00,000/1,00,000/50,000/1,20,000/10,000/7,20,000/-
3-06-2014
NBCC Ltd A/C Dr
To, Bank
7,20,000 /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)
By Salary
3,00,000
1,00,00,000 By Wages
1,00,000
)
To Balance b/d
1,00,00,000
To Share of
Taxes(SOT)
To TUEP
50,00,000
By Electricity
Expenses
50,000
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
s)
Income
Amount(Rs
)
To Salary
10000
By Property Tax
1,00,000
Wages
5000
Add-Outstanding
50,000
1,50,000
Printing &
Stationery
3000
By Water Tax
30,000
Interest
5000
By Profit on sale
of
refreshment(50,0
00-20,000)
20,000
Insurance
1000
Excess of Income
over Expenditure
1,86,000
2,00,000
2,00,000
Balance Sheet.
Liabilities
Capital Fund
10,00,00,000
Amou
nt
Assets
Amoun
t
Rs.
Less: Excess of
Income over Exp. Rs.
1,86,000
8,14,000
Furniture
5,00,000
Loan from HUDCO
1,00,000
Cash in Hand
10,000
Outstanding Rent
20,000
Cash at Bank
3,29,000
Subscription received in
advance
5,000
Stock
1,00,000
9,39,000
9,39,000
Thank You