Double Entry System --understand with simple and easy way

Double entry system is base of accounting . So we should understand what is double entry system .

Under double entry system ,"Every transaction affects two accounts and it must show in two side. One side is profit receiver and other side is profit giver ."




Rules of double entry system

1. For personal accounts

1. who is receiver = debit
2. who is giver = credit

2. For real accounts

1. what comes in = debit
2. what goes out = credit

3. for nominal accounts

1. all expenses and losses = debit
2. all incomes and gains = credit

Dears we should understand what is personal account , there are two types of personal account

one is human being account and other is artificial personal accounts

let see difference between both

Ram account is a human personal account but hdfc bank or icici bank is artificial personal account . But in double entry system , we will care both type of accounts not only human but we also care artificial personal accounts

Let us see the example of a journal entry

Question :- Dutt borrowed Rs. 10000 from his friend dinkar and Rs . 10000 from his elder sister mrs. Divya.Write the journal entry with the help of double entry system

Ans. Because we are making the accounts of Dutt so in business of dutt cash will comes in so cash account will be debited and dinkar and mrs. divya both are the giver of money so both account will be credited . But they gave in the of loan so with their name loan account must be attached

see it Dr. Amount Cr. Amount

Cash Account Dr. 20000 /

To dinkar 's loan account / 10000

To mrs. divya 'loan account / 10000