Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 2 Meaning and Fundamentals of Double Entry Book keeping PDF Download

Meaning and Fundamentals of Double Entry Book-keeping

2.1 Meaning and Definition of Double Entry Book-Keeping:

Double Entry Book-keeping System is the most scientific method of recording all monetary transactions in the books of accounts. This system owes its origin to Italian Merchant "LUCA D. BARGO PACIOLI" on 10th November 1494 and this day is celebrated as International Accounting Day. This system of Book-keeping is based on the fact that there are two aspects of every business transactions. Every business transaction involves two persons or accounts or parties where in one is the receiver of the benefit and the other is the giver of the benefit. If something comes into the business, something goes out from the business. Recording of two aspects of monetary transactions in the Books of Account in terms of Debit (Dr.) and Credit (Cr.) is called as "Double Entry" System of Book-keeping.

According to modern approach, every business transaction is concerned with Assets, Liabilities, Capital, Expenses and Income. Whenever there is an increase in assets and expenses it is debited and decrease in assets and expenses are credited.

Teacher's Note

Double Entry means every transaction has two sides. Just like when you buy a notebook with money, the money goes out but the notebook comes in - both sides matter.

Exam Trick

Remember: Double Entry = two accounts always. Every debit has equal credit. Think of it like a see-saw - one side goes up, one side goes down equally.

Points to Remember

Double Entry System records both sides of a transaction.
Every business transaction affects two accounts.
One account is debited and another is credited.
The debit amount always equals the credit amount.
This system started in Italy in 1494.

2.2 Methods of Recording Accounting Information:

There are two main systems of recording accounting information:

1) Indian System: Indian system maintains records in Indian languages such as Marathi, Hindi, Urdu, Gujarati etc. It is called Mahajani Deshinama system. In this system transactions are recorded or maintained in long books known as Bahi-Khata and Kird. This system of accounting is not based on Double Entry system of accounting. Thus, is not a scientific accounting system. Even today this system is used in India for small business organization.

2) English System:

A) Single Entry System: This system of accounting records only Cash book and Personal accounts. It is unscientific method and also known as an incomplete recording system, because it changes with the convenience of business for recording transactions. This system of accounting does not provide accurate information about the financial position of business and it is suitable for small business.

B) Double Entry System: Double Entry System is the most scientific method of recording all business transactions in the books of accounts. Under this system double or two fold effects of each transaction is recorded.

According to Double Entry Book-keeping System, one account is to be debited and another account is to be credited with equal amount.

Every debit has an equal and corresponding credit of the same amount is the basic principle of Double Entry System.

Teacher's Note

There are three ways to keep books in India - Indian, Single Entry, and Double Entry. Double Entry is the best and most reliable method, like how banks keep their records.

Exam Trick

Remember: Single Entry is incomplete (like writing only one side of your notebook). Double Entry is complete (like writing both sides). Always choose Double Entry in exams!

Points to Remember

Indian System uses local languages and is old-fashioned.
Single Entry System is incomplete and unscientific.
Double Entry System is scientific and complete.
Double Entry records two sides of every transaction.
Only Double Entry is accepted by banks and government.

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