The document provides an overview of the double-entry accounting system. It explains that the double-entry system records each transaction with two equal entries - a debit and a credit. This ensures the accounting equation always balances. The key aspects covered include how double-entry works by identifying accounts affected and recording transactions in journals and ledgers. Features such as the trial balance and preparation of financial statements are also summarized. Finally, the document contrasts double-entry with single-entry bookkeeping.

1. Double Entry
System
Submitted by-
Akshita
Submitted to-
Dr. Neeraj Gupta

2. Introduction
• Accounting historians have established that double-
entry book-keeping was practised in Florence in the
later 13th century. Although several systems were
developed by mathematicians and businessmen to
summarize and communicate business transactions,
only the one which Luca Friar Pacioli compiled has
survived and has become the basis of modern
accounting.
• Double entry system is the system under which each
transaction is regarded to have two- fold aspects and
both the aspects are recorded to obtain complete
record of dealings. Double entry system of book
keeping adheres to the rule, that for each transaction
the debit amount(s) must equal the credit amount(s).
That is why this system is called double entry system.

3. Double Entry System
• A double entry accounting system refers to
the bookkeeping method where two
entries are made simultaneously into two
different accounts, indicating a firm’s cash
inflow and outflow. The purpose is to tally
both the accounts and balance the credit
and the debit side. This accounting system
helps organizations assess their overall
performance in a financial year.

6. Features of Double Entry
System

7. Process of Double Entry System
Journal
Ledger
Trial Balance
Financial Statement

8. How does the Double-Entry
System Of Accounting Work?
• Step 1: Identify the financial transaction
• Determine the event that has occurred and needs an addition to
the record.
• The event can be a purchase, sale, payment, or receipt of cash.
• Example: A business purchases office supplies worth $1,000 on
credit from a supplier.
• Step 2: Determine the accounts
• Identify the accounts impacted by the transaction.
• Every transaction affects at least two accounts, one for debit and
the other for credit.
• Example: Office supply purchase on credit affects two accounts
– the office supplies account (an asset account) and
the accounts payable account (a liability account).

9. How does the Double-Entry
System Of Accounting Work?
• Step 3: Determine the type of accounts
• Determine the classification of the accounts impacted by the
transaction
• The accounts fall under the classifications of asset, liability, equity,
revenue, or expense accounts.
• Example: The office supplies account is an asset account, and the
accounts payable account is a liability account.
• Step 4: Record the transaction in the general journal
• Debit the account receiving an increase in value and credit the
account receiving a decrease in value
• Example: The accountant records the purchase of office supplies
on credit in the general journal with the following entry:
• Debit: Office supplies account – $1,000
• Credit: Accounts payable account – $1,000

10. How does the Double-Entry
System Of Accounting Work?
• Step 5: Post the transaction to the general
ledger
• Transfer the information from the general
journal to the general ledger
• Organize transactions by account for easier
analysis and financial statement preparation
• Example: The records from the general journal
count in the office supplies and accounts payable
accounts in the general ledger.

11. How does the Double-Entry
System Of Accounting Work?
Account Name Debit Credit
Office Supplies $1000
Accounts Payable $1000
Total $1000 $1000
Step 6: Prepare the trial balance
Summarize all accounts and their balances to ensure that
debits equal credits
Identify any discrepancies or errors in the accounting system

12. How does the Double-Entry
System Of Accounting Work?
• Step 7: Prepare the financial statements
Income
Statement
Revenue $0
Expenses $0
Net Income $0
Balance Sheet Amount
Assets:
Office Supplies
account
$1,000
Total Assets $1,000
Liabilities:
Accounts Payable
account
$1,000
Equity: $0
Liabilities +
Equity
$1,000
Cash Flow
Statement:
Cash inflows: $0
Cash outflows: $0
Net cash flow: $0

14. Disadvantages
of Double
Entry System
Requirement of
expert
knowledge
Lengthy
cumbersome
process
Expensive
Small business
don’t prefer

15. Classification of
Accounts
Traditional Approach
Accounts
Personal
Account
Natural
Personal
Account
Artificial
Personal
Account
Representative
Personal
Account
Real Account
Tangible
Account
Intangible
Account
Nominal
Account
Expenses or
Losses
Profits or Gains

16. Personal Account
• Personal accounts are accounts that are linked to
real people and organizations. John’s account,
Peter’s account, Procter & Gamble’s account,
Vibrant Marketing Agency’s account, City bank’s
account, and so on are examples of personal
accounts. For the purpose of determining the
amount due from or owed to each individual and
organization, the business keeps a separate
account for them.
• RULE
Debit the Receiver
Credit the giver.

17. Types of Personal Account
Natural Person
• Individuals or natural persons are associated with these
types of accounts, such as Ranveer’s A/c, Aryan’s A/c,
Ritwik’s A/c, and so on.
Artificial Account
• These accounts are linked to a variety of businesses and
organizations, including Roy Brothers Pvt Ltd A/c, Lion’s
Club A/c, and others. As a result, such institutions and
businesses are those that exist in the eyes of the law.
Representative Account
• Representative accounts are accounts that represent a
specific type of work. Outstanding Wages Accounts,
Outstanding Interest Accounts, Prepaid Expense Accounts,
and so on

18. Real Account
• Real accounts are accounts that relate to a
company’s assets or properties (both tangible and
intangible). To account for increases and declines in
the value of each asset, a separate account is kept.
Cash account, inventory account, investment
account, plant account, building account, goodwill
account, patent account, copyright account, and so
on are examples of real accounts.
• RULE
Debit what comes in
Credit what goes out.

19. Types of Real Account
• Tangible Account
• Accounts that are physical in nature are referred to as
tangible actual accounts. To put it another way, these
advantages are visible to the naked eye. These assets can
be felt, seen, and touched. For example, a/c in a building,
a/c in a vehicle, a/c in machinery, and so on.
• Intangible Account
• Accounts that deal with non-physical assets or things are
referred to as this type of account. In other words, these
assets cannot be seen, felt, or touched, yet they can be
evaluated in financial terms. These assets can be said to
have some value associated with them. For instance,
goodwill, patents, trademarks, and copyrights are all
examples.

20. Nominal Accounts
• Nominal accounts are accounts that deal with incomes,
gains, expenses, and losses. These accounts are typically
used to collect data for the purpose of creating a
business’s income statement or profit and loss account
for a specific time. Sales account, purchases account,
wages account, salaries account, interest account, rent
account, gain on sale of fixed assets account, loss on sale
of fixed assets account, and so on are examples of
nominal accounts.
• RULE
Debit all expenses and losses
Credit all income, revenue and gains

21. Modern Approach
• In a double entry accounting system, the total
volume of assets must balance with the total
number of liabilities and shareholders’ equity a
company has at a given point in time.
• Thus, the accounting equation of double entry
bookkeeping system can also be expressed as:
Total
Liabilities
Total
Equity
Total
Assets

22. Understanding Debit and Credit
• Debit and credit represent the increase or decrease in
the value of an account.
• A debit results in an increase in an asset account or a
decrease in a liability or equity account.
• A credit marks a decrease in an asset account or an
increase in a liability or equity account.
• For example, if a company purchases inventory worth
$1,000 on credit, the journal entry would be:
Debit: Inventory account for $1,000 (increase in assets)
Credit: Accounts payable account for $1,000 (increase in
liabilities)
In this example, the debit represents the increase in the
value of the inventory account, while the credit
represents the increase in the value of the accounts
payable account.

23. What is single-entry
bookkeeping?
• Single-entry bookkeeping is a simple and
straightforward method of bookkeeping in
which each transaction is recorded as a
single-entry in a journal. This is a cash-
based bookkeeping method that tracks
incoming and outgoing cash in a journal.

24. Double-Entry vs. Single-Entry
Accounting
Particulars Double-Entry Single-Entry
Number of Accounts
Each transaction affects at
least two accounts,
providing a complete
financial picture.
Only records transactions
in the cash register, giving
a partial view.
Safety
Involves at least two
accounts, reducing the risk
of fraud.
More susceptible to fraud
due to lack of cross-
checking.
Function
It aims to balance the total
debit and credit amounts.
Records expenses and
earnings separately over a
given period.
Accuracy in statement
preparation
Accountants detect
mistakes in the journal
and ledger, ensuring
accurate financial
statements.
Financial statements may
be less accurate since
accountants take numbers
directly from the ledger.

25. Double-Entry vs. Single-Entry
Accounting
Particulars Double-Entry Single-Entry
Credibility
Considered a more
reliable method of
accounting.
Less reliable for managing
large-scale transactions.
Spotting of Errors
Mistakes are easier to
identify and correct with
two entries per
transaction.
Errors are harder to spot
without a second set of
records.
Size of the business
Suitable for businesses of
all sizes, including
multinationals and
conglomerates.
Best suited for smaller
companies or fewer
transactions.

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