The Concept of Double Entry System SS1 Principles of Accounting
PRINCIPLES AND PRACTICE OF DOUBLE ENTRY
CONTENT
The Concept of Double Entry System
Review of Double Entry With Comprehensive Illustrations
The Concept of Double Entry System
Among the oldest known and indisputable principles of accounting is the Double Entry principle.
The principle states that, ‘for every debit entry there must be a corresponding credit entry’, which in everyday English means that for every receiver there must be a giver.
The receiver is always regarded as the Debtor whiles the giver as a creditor under this principle.
As far as double entry principle is concerned, there must always be two parties to a transaction. One entry at the debit side for the debtor or the receiver and the other entry at the credit side for the creditor or the giver.
Review of Double Entry With Comprehensive Illustrations
The Principles of Double Entry
The double entry principles applied by observing two rules. The rule states that debit all receiver, credit all giver; meaning that, the double entry system of book keeping will be used for recording transactions in the ledgers.
Summary:
Debit = Receiving account
Credit = Giving account
Procedures to be followed:
Every transaction must affect two accounts
Give names to the two accounts
Debit – Receiving account (Receiver)
Credit – giving account (Giver)
ILLUSTRATION
Illustration 1
Jan. 1 Miss. Faith starts business with ₦800.00 in bank
There are two accounts involved:
Capital account—-giving—-Credit = ₦800.00
Bank account—-receiving—-Debit = ₦800.00
[mediator_tech]
Miss. Faith is the owner of the business therefore her name must not appear in the books.
Entries in the ledger
DR CAPITAL ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 1 ₦
Bank 800
DR BANK ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ ₦
Jan. 1 Capital 800
Jan. 2 purchased goods ₦300.00 by cheque.
Two accounts are involved:
Purchases account—-receiving—-Debit = 300.0
Bank account—-giving—-Credit = 300.00
DR PURCHASES ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ ₦
Jan. 2 Bank 300
DR BANK ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 2 ₦
Purchases 300
Jan. 4 Sold goods ₦700.00 cash
Two accounts are involved:
Sales account—-giving—-Credit = ₦700.00
Cash account —-receiving—-Debit = ₦700.00
DR SALES ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 4 ₦
Cash 700
DR CASH ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ ₦
Jan. 4 Sales 700
Jan. 7 Paid wages N50.00 cash
Two accounts are involved:
Wages account —-Receiving—-Debit = N50.00
Cash account —-Giving—-Credit = N50.00
DR WAGES ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan ₦ ₦
7 Cash 50
DR CASH ACCT CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. ₦ Jan. 7 ₦
Wages 50
Jan. 8 bought machinery N500.00 paying by cheque
Two accounts are involved:
Machinery account—-Receiving—-Debit =500.00
Bank account—-Giving—-Credit =500.00
DR MACHINERY ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 8 ₦ ₦
Bank 500
DR BANK ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 8 ₦
Machinery 500
Jan. 10 Cash drawings N80.00
Two accounts are involved:
Cash account—-Giving—-Credit =80.00
Drawings account—-Receiving—-Debit =80.00
DR CASH ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 10 ₦
Drawings 80
DR DRAWINGS ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ ₦
Jan. 10 cash 80
Jan. 12 Goods returned to us by Baba N200.00
Two accounts are involved:
Returned inward account—-Receiving—-Debit =N200.00
Baba’s account—-Giving—-Credit =N200.00
DR RETURN ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ ₦
Jan. 12 Baba 200
DR BABA ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 12 ₦
Returned 200
Jan.17 Took cash N2, 400.00 from the bank and put it into cash till.
Two accounts are involved:
Bank account—-Giving—-Credit =N2, 400.00
Cash account —-Receiving—-Debit =N2,400.00
DR BANK ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 17 ₦
Cash 2,400.00
DR CASH ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 17 ₦ ₦
Bank 2,400.00
Jan. 20 we returned goods worth N100.00 to Jasper
Two accounts are involved:
Returned outward account—-Giving—-Credit = N100.00
Jasper account —-Receiving—-Debit = N100.00
DR RETURNED OUTWARD ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 20 ₦
Jasper 100
DR JASPER ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 20 ₦ ₦
Returned outward 100
Jan. 22 received commission in Cash N350.00
Two accounts are involved:
Commission—-Giving—-Credit = N350.00
Cash—-Receiving—-Debit = N350.00
DR COMMISSION ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 22 ₦
Cash 350
DR CASH ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 22 ₦ ₦
Commision 350
Jan. 23 took loan from Mark by cheque N750.00
Two accounts are involved:
Loan (Mark)—-Giving—-Credit =N750.00
Bank—-Receiving—-Debit =N750.00
DR LOAN ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 23 ₦
Bank 750
DR BANK ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 23 ₦ ₦
Loan 750
Jan. 25 sold car on credit to Ojo N220.00
Two accounts are involved:
Car account—-Giving—-Credit =N220.00
Ojo account—-Receiving—-Debit =N220.00
DR CAR ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 25 ₦
Ojo 220
DR OJO ACCT. CR
Date Particulars Folio Amount Date Particulars F Amount
₦ ₦
Jan. 25 Car 220
Jan. 27 paid cash for repairs of Motor Vehicle N1, 500.00
Two accounts are involved:
Motor Vehicle—-Receiving—-Debit =N1, 500.00
Cash—-Giving—-Credit =N1, 500.00
DR MOTOR REPAIR ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
Jan. 27 ₦ ₦
Cash 1,500.00
DR CASH ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 27 ₦
Motor Vehicle 1,500.00
Jan 30 withdrew N1, 000 cash for personal use
Two accounts are involved:
Drawings—-Receiving—–Debit =N1, 000.00
Cash—-Giving—-Credit =N1, 000.00
DR DRAWING ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 10 ₦
Jan. 30 Cash 1,000.00
DR CASH ACCT. CR
Date Particulars Folio Amount Date Particulars Folio Amount
₦ Jan. 30 ₦
drawings 1,000.00
Assignment
Explain the principle of double entry system.
