Conversion from single entry to double entry(03)

Single Entry System More economical way Defective way of recording transactions Impossible to know total purchases and sales No completeness of records

Single Entry System (Cont…) Only has : Personal account Cash account Bank account No trial balance, no accuracy of accounts Absence of balance sheet

Single Entry System (Cont…) Real and nominal accounts are absent Profit and loss accounts cannot be prepared Information is always doubtful Only shows one aspect of a transaction

Double Entry System Much better and reliable Two aspects of a transaction Weight should be maintained equally Has subsidiary ledger accounts

Double Entry System (Cont…) Both Debit and Credit aspects of a transaction are recorded Ledger contains real and nominal accounts Transactions are recorded in systematical manner Trial balance is present, accuracy can be checked

Double Entry System (Cont…) Financial position can be checked by making balance sheet Income and expenditure accounts are present

Debit and Credit Rule Account name Debit (Dr) Credit (Cr) Assets Liabilities Equity Revenue Expenses

The Accounting Equation If, Revenues = Expenses Assets = Liabilities + Equity If, Revenues = Expenses Assets = Liabilities + Equity + (Revenues – Expenses)

Steps Included in Double Entry System

Steps Included in Double Entry System (Cont…)

General Journal Dr Cr Bank account 10,00,000 Grant in aid (Revenue) 10,00,000 Opened bank account by depositing cheque Cash account 60,000 bank account 60,000 Withdraw cash

General Journal Dr Cr Purchases 105,000 Account payable 105,000 Purchased tables and chairs Computer 150,000 Account payable 150,000 Purchased computer

General Journal Dr Cr Ceiling fan 8,000 Cash 8,000 Cash purchases of ceiling fans Travelling advance 5000 Cash 5000 Travelling advance to A

General Journal Dr Cr Printing expense 2,000 Cash 2,000 Printing expenses Travelling expense 2,000 Cash 3,000 Travelling advance 5,000 A submit claim for expenses of 2000

General Journal Dr Cr Medical advance 10,000 Bank account 10,000 Medical advance to B by cheque Travelling expense 1,000 Cash 2,000 Travelling advance 3,000 A submit claim for expenses of 1000

General Journal Dr Cr Salary expense 15,000 Bank account 15,000 Salaries paid by bank Travelling expense 1,000 Cash 1,000 Travelling advance 2,000 A submit claim for expenses of 1000

General Journal Dr Cr Medical expense 5,000 Cash 5,000 Medical advance 10,000 B submit medical expenses, balance amount returned to office Salary expense 15,000 Bank account 15,000 Salaries paid by bank

General Journal Dr Cr Salary expense 15,000 Bank account 15,000 Salaries paid by bank Account receivable 12,000 Bank account 12,000 Loan given to C by cheque

General Journal Dr Cr Salary expense 15,000 Bank account 15,000 Salaries paid by bank Travelling expense 1,000 Travelling advance 1,000 A submit claim for expenses of 1000

General Journal Dr Cr Travelling advance 10,000 Cash 10,000 Further advance to A Cash account 15,000 Bank account 15,000 Withdraw cash

General Journal Dr Cr Salary expense 15,000 Cash 15,000 Salaries paid by cash Bank account 12,000 Account receivable 12,000 Loan received from C

General Journal Dr Cr Printing expense 5,000 Cash 5,000 Printing expenses Salary expense 15,000 Bank account 15,000 Salaries paid by bank

General Journal Dr Cr Salary expense 15,000 Salary payable 1500 Bank account 13,500 Salary paid by bank, payable to D Misc. expense 12,000 Cash 12,000 Misc. expenses

General Journal Dr Cr Salary payable 1500 Cash 1500 Salary paid to D in cash Salary expense 15,000 Bank account 15,000 Salaries paid by bank

General Journal Dr Cr Printing expense 3,000 Cash 3,000 Printing expenses Telephone expense 15,000 Bank account 15,000 Telephone expenses by cheque

General Journal Dr Cr Advance to Mr. Verma 8,000 Cash 8,000 Advance to Mr. Verma Account payable 50,000 Bank account 50,000 Payment to Indian store by cheque

General Journal Dr Cr Account payable 72,500 Bank account 72,500 Payment to M/s Excel

1000,000 12,000 Bank account 60,000 10,000 15,000 15,000 15,000 12,000 15,000 15,000 15,000 13,500 15,000 15,000 50,000 72,500 674,000 Cash account 8000 5000 2000 10,000 15,000 5000 12,000 1500 3000 8000 16,500 60,000 1000 2000 5000 15000 3000

Revenue 10,00,000 10,00,000 Account receivable 12,000 12,000 Travelling expense 2000 1000 1000 1000 5,000 Account payable 105,000 150,000 132,500 50,000 72,500

Purchases 105,000 105,000 Printing expense 2000 5000 3000 10,000 Travelling advance 5000 10,000 4,000 Ceiling fan 8000 8000 5000 3000 2000 1000

To Verma 8000 8000 Telephone expense 15,000 15,000 Medical advance 10,000 10,000 Medical expense 5000 5000

Salary payable 1500 1500 Salary expense 15000 15000 15000 15000 15000 15000 15000 15000 120,000 Misc. expense 12000 12000

Trial Balance Particulars Dr Cr Bank account 674,000 Cash account 16500 Revenue (Aid) 10,00,000 Account receivable 0 Account payable 132,500 Travelling expense 5000 Travelling advance 4000 Printing expense 10,000 Purchases 105,000 Ceiling fan 8000 Computer 150,000

Trial Balance Particulars Dr Cr Medical expense 0 Medical advance 5000 Loan to Verma 8000 Salary payable 0 Misc. expenses 12,000 Salary expense 120,000 Telephone expense 15000 Total 1132,500 1132,500

Income Statement Accounts Dr Cr Revenue 10,00,000 Expenses : Travelling expense 5000 Printing expense 10,000 Telephone expense 15,000 Misc. expense 12,000 Salary expense 120,000 Total 167,000 167,000

Revenue – Expenses = Net income 10,00,000 – 167,000 = 833000

Balance Sheet Particulars Dr Cr ASSETS : Cash account 16,500 Bank account 674,000 Travelling advance 4000 Purchases 105,000 Ceiling fan 8000 Computer 150,000 Advance to Verma 8000 LIABILITIES : Account payable 132,500 Net income 833000 Total 965500 965500

Conversion from single entry to double entry(03)

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