Double Entry System – Under this system a proper and full record of all transaction is made every transaction has a double or dual aspect. It is based upon the principal that every receiver implies giver and every giver implies receiver. This method writhing every transaction in two accounts is given debit side and the other account is given credit with an equal amount. Thus, on any date, the total of all debits must be equal to the total of all credit because every debit entry has a corresponding credit.
For example, ram purchased goods from Kewal, of Rs.5000. here ram is receiver of goods and hence, debtor of Kewal, who is the giver of goods, that is, he is the creditor of Ram. Similarly, Salary paid to manager is in lieu of the benefit received by the business, in terms of the service rendered ect. Thus, all transaction will have two aspect and a proper record of the transaction is necessary for this, it has to be recognized that.
1.) Each transaction is to be dealt with as standing alone having no preceding ar succeeding connection, and
2.) A business is regarded as a separate entity quite distinct from its proprietor and the exchange in transaction takes place between the business and the outsider.« Back to Dictionary Index