PRINCIPLES OF DOUBLE-ENTRY BOOK-KEEPING

accounting and book keeping is based some principles, accounting transactions are posting on the basis of this principles. following are the important principles of double entry book keeping...

Dual aspect

dual aspect of book keeping is based on dual aspect concept of accounting, that means, there will have dual aspect for every  transactions in accounting.

The ledger

We record the receiving and giving aspects of business transactions in a book of accounts which we call "the ledger". An account is opened in the ledger for each receiving person or "thing" and for each giving person or "thing". For example, if I am in business and I buy a car, paying by cheque, I would open an account in my ledger for "motor vehicles" and one for "bank". If I then buy a fax machine and pay cash, I would open an account for "office equipment" and one for "cash".

Debits and credits

We record the receiving aspect of transactions by debiting the "receiving" account and crediting the "giving" account. If we look at the example in paragraph above, we can see which accounts to debit and which accounts to credit. When I buy a car, paying by cheque, I debit the account for motor vehicles as the receiving account, and credit the account for bank as the giving account. When I buy a fax for cash, I debit the account for office equipment as the receiving account, and credit the account for cash as the giving account.

Stock

It is worth mentioning at this stage that the account for stock is split into an account for "purchases of stock" and an account for "sales of stock". When we purchase goods for resale (i.e. purchase stock) for cash, we debit the account for purchases as the receiving account, and we credit the account for cash as the giving account.

Capital

The other account at which we should look at this stage, is the capital account. First,do remember that, in our ledger, we keep the accounts which reflect the transactions of a business. In the capital account we record the amount which the proprietor of the business personally pays into the business itself.