Tag: double entry system

The system of recording transactions based on dual aspect is called as double entry system.

The double-entry system of accounting or bookkeeping means that for every business transaction, amounts must be recorded in a minimum of two accounts. The double-entry system also requires that for all transactions, the amounts entered as debits must be equal to the amounts entered as credits.

The matching concept involves that the revenue earned in an accounting year is matched with the expenses incurred during the same period to generate that revenue.

The dual aspect concept indicates that each transaction made by a business needs to be recorded in two separate accounts.

Whenever a transaction occurs there is a two-sided effect, one is credit and the other is debit for a similar amount.

In double account, all business transactions are recorded as having dual aspect.

 The double entry system of bookkeeping is based on the fact that every transaction has two parts and that this will therefore affect two ledger accounts. Every transaction involves a debit entry in one account and a credit entry in another account.

On the other hand, the double entry system is based on scientific principles and is, therefore, used by most of the business houses. 

The system recognizes the fact that every transaction has two aspects and records both aspects of each and every transaction.

Companies Act, 2013 requires every company to keep and maintain at its registered head office books of accounts and relevant documents and the financial statements for each FY (financial year) that provides a true and fair picture of the company's state of affairs which includes its branch offices and other offices.