It is the art of recording the business transactions in a set of books systematically. The two systems in book-keeping are
Advantages of Double-Entry System of Book Keeping
i. It is a complete systematic record
ii. In enables businessmen to find profit or loss at any time
iii. A trial balance can be prepared
iv. A balance sheet which indicates the current financial position can be prepared
v. It reveals the amount due to creditors and due from customers
vi. It discovers and prevents errors and frauds
vii. The tax authorities prefer double entry system only.
Single Entry System of Book Keeping
Single entry system of book keeping is the method of maintaining accounts which does not exactly follow the principles of double-entry system. Only the cash book and personal ledgers are maintained, i.e., the real and nominal accounts are not maintained under this sytem.
No fixed assets, purchases, sales, expenses, income accounts etc., can be found under this system. As trial balance cannot be prepared, the accuracy of accounts can’t be ascertained. No final account and balance sheet preparation is possible. Therefore, this system is said to be unscientific and not generally followed for #accounting purposes.
The set of books are
2. Subsidiary books
4. Trial Balance and
5. Final Accounts.
What are Business Transactions?
Dealings of the business with the customers, another business, Government, other third parties and with itself.
- Investment of capital
- #Purchase of goods
- #Sale of goods
- #Purchase of assets
- Payment of #rent, #salary