Accounting means proper book keeping of records. Transactions are done on the basis of requirements in a business. In every transaction minimum two accounts get affected and these are just opposite accounts. This can easily be understood as every time when there is a transaction, both the purchaser’s account and seller’s account affects. One side decreases with the same value as other side increases. Purchaser has one unit of increment in furniture and the seller gets his payment in the back accounting for the same value.
If you think that only one account will have it impact, then it is not true. This is the prime reason that transactions are known as double entry. Many times students think that double entry means transactions takes place double, but it’s not correct.
Understanding the debit and credit in view of business
In business, at least two accounts always affect in a transaction. Moreover, both accounts are in benefit. It means at the time an account receiving and another account yielding both are in benefit. A receiving account is debited and the giver account to a business is credited. It is always important to know that an amount is written twice in transaction record as in debit part as well as the same value in a credit part.
It can easily be understood with an example. If a party receives $500 from John, then John provides the cash to a business, and hence his account will be credited. The other account or cash account receives $500 and hence it is debited.
Characteristics and principle of double entry
The effects of two-fold are important in double entry system. Total credit value must be equal to total debit value.
What are the different types of account?
For keeping records in a proper way the type of accounts are –
This type of accounts indicates a firm, an institution, a single company, an individual etc are types of personal account. Account of John, A Cambridge University, and TRF Limited are appropriate examples of this category.
In personal there are three prime sections and these are –
This category has two different sections and these are –
What is a real account?
In double entry book keeping system the real account indicates the accounts related to money. Cash account, Machinery account, Furniture account, Good will and many such types come in this category.
Various types of real accounts –
In this type the things are touchable and on that basis transactions take place. Money, furniture, building, land etc. come under this category.
A number of transactions take place for the things which are untouchable. Trademark, patents goodwill and many other come under this type however; the valuation is always measured in money.
What do you mean by Nominal Account?
In this type maintenance takes place related to all expenses as well as incomes. Discount, commission, and interest are the best examples of nominal account in case of proper income. Moreover, for expenses, the different examples are rent paid, salary paid, bad debts and discount allowed.
What are the rules for various types of accounting entries?
Students need the knowledge of all rules, but according to modern system, the accounts are classified in different categories. What are these? Let us know the different types of modern accounts.
What are the modern means of accounts for transaction?
The transactions for the modern means are consisting of following accounts –
What are the advantages or benefits of double entry system?
What are the various parts or stages in Double Entry?
There are only three parts in double entry. These are –
All transactions are recorded in a primary book at the beginning. This book is known as Journal. In case of large transactions or in case of a large business, the journal is divided in its sub categories. These are known as Subsidiary books.
It is the very next step of journal or the original records. In this all records present in the original book is transferred to another book, which is its classified form. This one is known as Ledger. In this all transaction of similar pages are collected together or at one place.
This is very important step. In this all transactions in ledger are required to balance perfectly. In this debit balances are kept in one side and credit balances are kept in another side. Moreover, after doing that the addition of debit side must be equal to the addition of credit side. This is known as Trial Balance. This is helpful in concluding profit and loss and balance sheet.
Now, it is clear that all three parts are related to each other. Original record or journal must be clear and perfect. Only by entering record in primary book clearly one can easily go with it for Ledger and then Trial Balance. So, any mistake may create difficulty for the account department to get exact record.
Who are interested in getting information of double entry in accounting?
The entries are essential for –
It is always essential for internal users to go through each transaction. Only in that way they are capable to grab the exact solution for their business requirement.
Business owners need exact information to understand their capability. They plan a lot with the proper report for further expenditure. They have interest to know about the profit. If they gain, then what is the increasing value or decrease in profit? In case of loss, they also have the similar queries. It means it is very essential for owners.
This is very essential for managers to get exact information of different reports. With the help of double entry they can easily conclude what is going on and what is the further need of that company. The different sections as cost department for budget and other important task.
Some users are associated with companies. When any small company or large company gains profit in some particular time period, then they need information for their own profit. Not all part of reports is announced to the external users, but they may know some part of it.
Now, it is important for students to know how to prepare double entry. A number of companies are there, and each company maintains its account department perfectly. However, for small companies, double entry system takes place in small manner, but for large business it takes place in large manner.
How double entry is essential for students?
This is always essential for a company to have proper accounting system. So, a number of topics along with double entry are introduced. Students need to go through cases and proper transactions. Each transaction must be divided in three categories, and then it should be placed accurately according to the need of that case.
Students must have proper knowledge of each basic element before they generate report for a company. In case of double entry too, they must go through all information.
How students can easily get a good grip over double entry?
A number of tips are there for students to enhance their knowledge –
Now, it is clear that students do not understand how to handle cases, and thus they need to go through all above points for a better score.
How do students solve complex problems?
Many students do not concentrate and try to make report without understanding the case. So, in complex cases, a number of elements need to understand in a proper way. Before you make any report, it is important to understand original entry or the first stage entry. After that ledger and then trial balance is implemented correctly. So, if you have issues, then it is important to contact your senior or faculties for clearing that.
At the time when students have such cases, and they are unable to solve out, then they can easily go with expert’s solution. This is a technology of internet, and thus a number of online service providers are available for students. A number of cases can easily be solved by the experts through online.
How online assistance is perfect for students?
Students can easily get online solution from their home. Online assistance is suitable, because when you apply to get the result, then experts go through the problem and then solve it appropriately. There are some important points that students must know when they apply for taking service. These are as follows –
So, it is clear that how double entry system is one of the vital topics in accounting and how you will get assistance for the assignments related to it.
Author Bio –
Michelle Johnson is a known faculty in Harvard University. She has more than eight years of experience. So, she is able to solve all kinds of problems in accounting. She has a good grip over double entry system. Students can easily contact her through online for her assistance. She can easily explain and make solutions completely understandable for students.