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DOUBLE ENTRY SYSTEM
Meaning:
Is the book keeping principle of recording transactions twice in a book of account whereby the principle states that every debit entry must have corresponding credit entry and every credit entry must have corresponding debit entry with the same amount.
The fundamental rule to double entry system is to debit the account what is received and credit what is given out.
Example Mr. Juma started business on 1st June 2008 with capital in cash 30,000/=
June 2. With capital in cash 30,000/=
3. Bought goods for cash Sh. 22,000/=
4. Sold goods for cash of Sh 27,000/=
5. Paid carriages sh 850/=
10. Cash sales sh 12,000/=
15. Bought goods for cash sh 25,000/=
18. Paid rent sh 1,200/=
20. Paid advertising sh. 1,200/=
22. Sold goods for cash sh. 15,000/=
25. Cash sales to date sh. 20,000/=
26. Paid wages goods for cash sh 500/=
27. Purchased goods for cash sh 500/=
28. Sold goods for cash sh 350/=
Record the transactions in the appropriate ledger account.
Solution
DR
CASH A/C (L 1) CR
CASH A/C (L 1) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
1/6/2008 | capital | 2 | 30000 | 2/6/2008 | Furniture | 3 | 1000 |
Sales | 5 | 27000 | 5/6/2008 | Purchase | 4 | 22000 | |
10/6/2008 | Sales | 5 | 12000 | 5/5/2008 | carriage | 6 | 850 |
22/6/2008 | Sales | 5 | 15000 | 15/6/2008 | Purchases | 4 | 25000 |
25/6/2008 | Sales | 5 | 20000 | 18/6/2008 | Rent | 7 | 1200 |
28/6/2008 | Sales | 5 | 350 | 20/6/2008 | Advert | 8 | 750 |
26/6/2008 | Wages | 9 | 500 | ||||
27/6/2008 | Purchases | 4 | 500 | ||||
Dr CAPITAL ACCOUNT (2) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | ||
1/6/2008 | cash | 30000 |
Dr FURNITURE ACCOUNT (3) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | |
2/6/2008 | Cash | 1000 |
Dr PURCHASES ACCOUNT (4) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
3/6/2008 | Cash | 22,000 | |||||
15/6/2008 | Cash | 25,000 | |||||
27/6/2008 | Cash | 500 |
Dr SALES ACCOUNT (5) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
4/6/2008 | Cash | ||||||
10/6/2008 | Cash | 12000 | |||||
22/6/2008 | Cash | 15000 | |||||
25/6/2008 | 20000 | ||||||
28/6/2008 | Cash | 350 |
Dr CARRIAGE ACCOUNT (6) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
5/6/2008 | Cash | 850 |
Dr RENT ACCOUNT (7) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
Cash | 1200 |
Dr WAGES ACCOUNT (9) Cr
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
26/6/ 2008 | Cash | 500 |
EXERCISE
Tatu commenced a business on 1st August 1980 by introducing Sh. 30,000 in cash.
August 1. Purchased goods for cash 15,000
1. Paid carriage on goods purchased 100.
5. Sold goods for cash 13,000
6. Paid carriage on sales 150
10. Cash purchases 10,000
15. Cash sales 12,500
20. Paid laborers in cash 1,200
25. Paid Electricity 50
28. Cash sales 1,000
30. Paid water bill in cash 45TQ
30. Payment made for purchases 5,000
Post the above transactions in the ledger.
DR CASH ACCOUNT ( L 1 ) CR
Particular | Folio | Amount | Date | Particular | Folio | Amount | |
1/8/1980 | capital | 2 | 30000 | 1/8/1980 | Purchases | 3 | 15000 |
5/8/1980 | 5 | 13000 | 1/8/1980 | Carriage | 4 | 100 | |
15/8/1980 | Sales | 5 | 12500 | 6/8/1980 | Carriage | 4 | 150 |
28/8/1980 | Sales | 1000 | 10/8/1980 | Purchase | 3 | 10000 | |
20/8/1980 | Laborers | 6 | 1200 | ||||
25/8/1980 | Electricity | 7 | 50 | ||||
30/8/1980 | Water bill | 8 | 45 | ||||
30/8/1980 | Purchases | 3 | 5000 |
DR CAPITAL ACCOUNT (2) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
1/8/1980 | cash | 30,000 |
DR PURCHASES ACCOUNT (3) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
1/8/1980 | Cash | 15,000 | 31/8/1980 | Balance c/d | 30,000 | ||
10/8/1980 | Cash | 10,000 | |||||
30/8/1980 | Cash | 5,000 | |||||
30,000 | 30,000 |
DR CARRIAGE ACCOUNT (4) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
1/8/1980 | Cash | 100 | |||||
6/8/1980 | Cash | 150 | |||||
250 | 250 |
DR SALES ACCOUNT (5) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
15/8/1980 | Cash | 12500 | |||||
28/8/1980 | Cash | 1000 | |||||
26500 | 26500 |
DR LABORERS ACCOUNT (6) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
20/8/1980 | Cash | 1200 |
DR ELECTRICITY ACCOUNT (7) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
25/8/1980 | Cash | 50 |
DR WATER BILL ACCOUNT (8) CR
Date | Particular | Folio | Amount | Date | Particular | Folio | Amount |
30/8/1980 | Cash | 45 |
CREDIT TRANSACTIONS
A Credit transactions is a situations whereby goods are sold or bought but payments made later.
But the principles of book keeping requires that whenever the transactions made on Cash or on Credit, the records must be kept.
Sales on Credit
When goods are sold on Credit, the usual entries are Dr personal a/c to show the receipts of goods by the customers and credit sales a/c with the value of goods sold during that period.
Example:
Mr Juma bought goods costing Tshs 20,000 on credit from Hamida.
But the principles of book keeping requires that whenever the transactions made on Cash or on Credit, the records must be kept.
Sales on Credit
When goods are sold on Credit, the usual entries are Dr personal a/c to show the receipts of goods by the customers and credit sales a/c with the value of goods sold during that period.
Example:
Mr Juma bought goods costing Tshs 20,000 on credit from Hamida.
Solutions:
Double entry in the books Mr.Juma
Example.2
Mathew sold goods on credit to Janeth Tshs 40,000/=.
Double entry in the books of Mathew.
The Balancing of Accounts
Means that each side of the account is total and the difference between two sides (Dr & Cr) is ascertained.
Balance lies on the side which has greater for example if the credit side is greater than debit side, the balance called credit balance.
The balance is written on the side has smaller/lesser total in order to make each side equal and the word balance c/d or c/f means balance carry down or forward of the trading period and then brought down or forward the balance by indicate the word (b/d & b/f) to the other side belong to the total as the example below shows:
Example:
record the following transactions in the ledger 2013.
Jan 1 Commence business with Cash 60,000
2 Purchased goods for Cash 30,000
3 Paid office cleaners 2,000
4 Sold goods for cash 40,000
5 Paid wages 3,000
8 Purchased goods on credit from Ally 20,000
10 Sold goods to Aika for 25,000
11 Paid Ally in his account 10,000
12 Received from Aika 25,000
Enter the above transactions and balance the accounts at the end of the January and brought down the balance.
Means that each side of the account is total and the difference between two sides (Dr & Cr) is ascertained.
Balance lies on the side which has greater for example if the credit side is greater than debit side, the balance called credit balance.
The balance is written on the side has smaller/lesser total in order to make each side equal and the word balance c/d or c/f means balance carry down or forward of the trading period and then brought down or forward the balance by indicate the word (b/d & b/f) to the other side belong to the total as the example below shows:
Example:
record the following transactions in the ledger 2013.
Jan 1 Commence business with Cash 60,000
2 Purchased goods for Cash 30,000
3 Paid office cleaners 2,000
4 Sold goods for cash 40,000
5 Paid wages 3,000
8 Purchased goods on credit from Ally 20,000
10 Sold goods to Aika for 25,000
11 Paid Ally in his account 10,000
12 Received from Aika 25,000
Enter the above transactions and balance the accounts at the end of the January and brought down the balance.
Solution
