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Basic Accounting Concepts

Double-entry bookkeeping records every transaction with equal and opposite entries to different accounts to maintain a balance. It is used when assets must equal liabilities plus equity. Each transaction affects two accounts, such as increasing cash while increasing a loan payable. Special journals streamline recording common transactions. Double-entry provides error checking as total debits must equal credits and assets equal liabilities plus equity. It is sufficient for businesses focusing on revenues, expenses, assets, liabilities and equities, while single-entry focusing only on revenues and expenses can be used for small cash basis businesses.

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Khurram Baig
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71 views

Basic Accounting Concepts

Double-entry bookkeeping records every transaction with equal and opposite entries to different accounts to maintain a balance. It is used when assets must equal liabilities plus equity. Each transaction affects two accounts, such as increasing cash while increasing a loan payable. Special journals streamline recording common transactions. Double-entry provides error checking as total debits must equal credits and assets equal liabilities plus equity. It is sufficient for businesses focusing on revenues, expenses, assets, liabilities and equities, while single-entry focusing only on revenues and expenses can be used for small cash basis businesses.

Uploaded by

Khurram Baig
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Basic accounting concepts.

 What is DOUBLE entry bookkeeping record system?


- Double-entry bookkeeping system. Double-entry bookkeeping, in accounting,
is a system of bookkeeping so named because every entry to an account requires
a corresponding and opposite entry to a different account. The double entry has
two equal and corresponding sides known as debit and credit.
 What is double entry system in bookkeeping?
- The double entry system of accounting or bookkeeping means that every
business transaction will involve two accounts (or more). For example, when a
company borrows money from its bank, the company's Cash account will increase
and its liability account Loans Payable will increase.
 What is DOBULE entry rule ?
- The Rule of Double-Entry Accounting. In a double-entry transaction, an equal
amount of money is always transferred from one account (or group of accounts) to
another account (or group of accounts). Accountants use the terms debit and credit
to describe whether money is being transferred to or from an account.
 What is the purpose of double entry bookkeeping?
- The purpose and goal of double-entry bookkeeping is to enter financial transaction
records so that when financial statements and reports are run, the company's
assets are equal to its liabilities plus owners' equity (net worth).
 What are the types of special journals ?
- Special journals are designed as a simple way to record the most frequently
occurring transactions. There are four types of Special Journals that are frequently
used by merchandising businesses: Sales journals, Cash receipts journals,
Purchases journals, and Cash payments journals.
 What is the difference between single entry and double entry system of
accounting?
-
The system of accounting in which only one sided entry is required to record
financial transactions is Single Entry System. The accounting system, in which
every transaction affects two accounts simultaneously is known as the Double Entry
System.
 When and Where is Single-Entry Accounting Sufficient?
- Single-entry bookkeeping and accounting can be adequate for a small business practicing cash
basis accounting. Small firms may, in fact, prefer single-entry accounting over a double-entry
system
 When and where is double entry accounting sufficient?
 A double-entry system provides several forms of error checking that are absent in a single-entry
system. In the double-entry system, every financial transaction results in both a debit(DR) in one
account and an equal, offsetting credit (CR) in another account. For each reporting period, total debits
must equal total credits. That is:
 Total DR = Total CR
 Moreover, a single-entry system works so that the Balance sheet equation always holds:
 Assets = Liabilities + Equities
 These equations together are known as the accounting equation. Any departure from these principles
in a double-entry system is a signal that account histories include an error
Double-Entry System: Focus on Revenues, Expenses, Assets, Liabilities, and Equities.
Single-Entry System: Focus on Revenues and Expenses Only

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