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THAWBAN BAIG
Single Entry System
More economical way
Defective way of recording transactions
Impossible to know total purchases and sales
No completeness of records
Single Entry System (Cont…)
Only has : Personal account Cash account Bank account
No trial balance, no accuracy of accounts
Absence of balance sheet
Single Entry System (Cont…)
Real and nominal accounts are absent
Profit and loss accounts cannot be prepared
Information is always doubtful
Only shows one aspect of a transaction
Double Entry System
Much better and reliable
Two aspects of a transaction
Weight should be maintained equally
Has subsidiary ledger accounts
Double Entry System (Cont…)
Both Debit and Credit aspects of a transaction are recorded
Ledger contains real and nominal accounts
Transactions are recorded in systematical manner
Trial balance is present, accuracy can be checked
Double Entry System (Cont…)
Financial position can be checked by making balance sheet
Income and expenditure accounts are present
Debit and Credit Rule
Account name Debit (Dr) Credit (Cr)
Assets
Liabilities
Equity
Revenue
Expenses
The Accounting Equation
If, Revenues = Expenses
Assets = Liabilities + Equity
If, Revenues = Expenses
Assets = Liabilities + Equity + (Revenues – Expenses)
Steps Included in Double Entry System
Steps Included in Double Entry System (Cont…)
Steps Included in Double Entry System (Cont…)
General Journal Dr
CrBank account 10,00,000
Grant in aid (Revenue) 10,00,000
Opened bank account by depositing cheque
Cash account 60,000
bank account 60,000
Withdraw cash
General Journal Dr
CrPurchases 105,000
Account payable 105,000
Purchased tables and chairs
Computer 150,000
Account payable 150,000
Purchased computer
General Journal Dr
CrCeiling fan 8,000
Cash 8,000
Cash purchases of ceiling fans
Travelling advance 5000
Cash 5000
Travelling advance to A
General Journal Dr
CrPrinting expense 2,000
Cash 2,000
Printing expenses
Travelling expense 2,000
Cash 3,000
Travelling advance 5,000
A submit claim for expenses of 2000
General Journal Dr
CrMedical advance 10,000
Bank account 10,000
Medical advance to B by cheque
Travelling expense 1,000
Cash 2,000
Travelling advance 3,000
A submit claim for expenses of 1000
General Journal Dr
CrSalary expense 15,000
Bank account 15,000
Salaries paid by bank
Travelling expense 1,000
Cash 1,000
Travelling advance 2,000
A submit claim for expenses of 1000
General Journal Dr
CrMedical expense 5,000
Cash 5,000
Medical advance 10,000
B submit medical expenses, balance amount returned to office
Salary expense 15,000
Bank account 15,000
Salaries paid by bank
General Journal Dr
CrSalary expense 15,000
Bank account 15,000
Salaries paid by bank
Account receivable 12,000
Bank account 12,000
Loan given to C by cheque
General Journal Dr
CrSalary expense 15,000
Bank account 15,000
Salaries paid by bank
Travelling expense 1,000
Travelling advance 1,000
A submit claim for expenses of 1000
General Journal Dr
CrTravelling advance 10,000
Cash 10,000
Further advance to A
Cash account 15,000
Bank account 15,000
Withdraw cash
General Journal Dr
CrSalary expense 15,000
Cash 15,000
Salaries paid by cash
Bank account 12,000
Account receivable 12,000
Loan received from C
General Journal Dr
CrPrinting expense 5,000
Cash 5,000
Printing expenses
Salary expense 15,000
Bank account 15,000
Salaries paid by bank
General Journal Dr
CrSalary expense 15,000
Salary payable 1500
Bank account 13,500
Salary paid by bank, payable to D
Misc. expense 12,000
Cash 12,000
Misc. expenses
General Journal Dr
CrSalary payable 1500
Cash 1500
Salary paid to D in cash
Salary expense 15,000
Bank account 15,000
Salaries paid by bank
General Journal Dr
CrPrinting expense 3,000
Cash 3,000
Printing expenses
Telephone expense 15,000
Bank account 15,000
Telephone expenses by cheque
General Journal Dr
CrAdvance to Mr. Verma 8,000
Cash 8,000
Advance to Mr. Verma
Account payable 50,000
Bank account 50,000
Payment to Indian store by cheque
General Journal Dr
CrAccount payable 72,500
Bank account 72,500
Payment to M/s Excel
1000,00012,000
Bank accountBank account60,00010,00015,00015,000 15,00012,00015,00015,00015,00013,50015,00015,00050,00072,500
674,000
Cash accountCash account80005000200010,00015,000500012,000150030008000
16,500
60,000100020005000150003000
RevenueRevenue10,00,000
10,00,000
Account receivableAccount receivable12,000
12,000
Travelling expenseTravelling expense2000100010001000
5,000
Account payableAccount payable105,000150,000
132,500
50,00072,500
PurchasesPurchases105,000
105,000
Printing expensePrinting expense200050003000
10,000
Travelling advanceTravelling advance500010,000
4,000
Ceiling fanCeiling fan
8000
80005000300020001000
To VermaTo Verma8000
8000
Telephone expenseTelephone expense15,000
15,000
Medical advanceMedical advance10,000
10,000
Medical expenseMedical expense
5000
5000
Salary payableSalary payable1500
1500
Salary expenseSalary expense1500015000150001500015000150001500015000
120,000 Misc. expenseMisc. expense
12000
12000
Trial BalanceParticulars Dr Cr
Bank account 674,000
Cash account 16500
Revenue (Aid) 10,00,000
Account receivable 0
Account payable 132,500
Travelling expense 5000
Travelling advance 4000
Printing expense 10,000
Purchases 105,000
Ceiling fan 8000
Computer 150,000
Trial BalanceParticulars Dr Cr
Medical expense 0
Medical advance 5000
Loan to Verma 8000
Salary payable 0
Misc. expenses 12,000
Salary expense 120,000
Telephone expense 15000
Total 1132,500 1132,500
Income StatementAccounts Dr Cr
Revenue 10,00,000
Expenses :
Travelling expense 5000
Printing expense 10,000
Telephone expense 15,000
Misc. expense 12,000
Salary expense 120,000
Total 167,000 167,000
Revenue – Expenses = Net income
10,00,000 – 167,000 =
833000
Balance SheetParticulars Dr Cr
ASSETS :
Cash account 16,500
Bank account 674,000
Travelling advance 4000
Purchases 105,000
Ceiling fan 8000
Computer 150,000
Advance to Verma 8000
LIABILITIES :
Account payable 132,500
Net income 833000
Total 965500 965500
