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Book Keeping

Book Keeping


It is the art of recording the business transactions in a set of books systematically. The two systems in book-keeping are

  1. Single entry system of book-keeping and
  2. Double entry system of book-keeping

 

Advantages of book keeping

Art of Book Keeping

Advantages of Double-Entry System of Book Keeping

  • It is a complete systematic record
  • In enables businessmen to find profit or loss at any time
  • A trial balance can be prepared
  • A balance sheet which indicates the current financial position can be prepared
  • It reveals the amount due to creditors and due from customers
  • It discovers and prevents errors and frauds
  • The tax authorities prefer double entry system only.

 

double entry system of book keeping

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 system.

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

1. Journal

2. Subsidiary books

3. Ledger

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.

For example

  • Investment of capital
  • Purchase of goods
  • Sale of goods
  • Purchase of assets
  • Payment of  rent, salary

A transaction may be a credit or cash transaction. The cash transaction involves cash (incoming or outgoing) whereas credit transaction does not involve cash (no cash comes in or goes out).

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