The double entry book-keeping was introduced in
1894 by Luca Pacioli . He is an
Italian, a rev, and a mathematician. The
double entry principle states that in every
debit entry, there must be a corresponding credit entry and vice versa. That is to say
where there is a giver, there must be a receiver. It further state that every transaction has a
dual aspect (receiver)
debit and credit( giver).
Ie to say that every transaction that is to be recorded in the book of account, should be recorded twice. An account is opened for both the giver and receiver of value . the accounts that receives value is debited while the accounts that gives out value is credited. i.e debit the
receiver, and credit the giver with
the value of the transactions involved.
In applying the double entry principle, the following procedural
steps must be followed: Ie to say that every transaction that is to be recorded in the book of account, should be recorded twice. An account is opened for both the giver and receiver of value . the accounts that receives value is debited while the accounts that gives out value is credited. i.e debit the
1. analyze the transaction and
identify the two accounts involved
2. write up
the account by identifying the
receiver of value with the amount
received and crediting the giver of
value with the value given up ie debit
the receiver and credit the giver
Examples
1.
a trader buyers goods for
resale and paid cash
account involved:
purchases ac (receiver of value )
and cash account (given to value)
action required: debit purchases
account in the ledger credit cash
account
2.
a trader buys goods
from Ndife Blessing on credit . Account involved: Purchases account (receiver
of value) and Ndife Blessings account (giver of value) action
required: debit purchases account, credit ndife
blessings account
3.
a trader sells goods for cash
Action
Involved: Sales account (giver of value and cash account (receiver of value )
Action
Required: Debit cash account (cash book) and
credit sales account in the ledger
4.
A businessman pays for
advertising in cash.
Action
involved:
advertising account (receiver of value ) and cash account (giver of
value)
Action required: debit
advertising account and credit
cash account
In general: Assets are debited and liabilities credited
-
loses are debited
and profit credited
-
expenses a debited and income credited.