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SUBJECT: BUSINESS STUDIES
WEEK 1.
TOPIC: REVISION/DOUBLE ENTRY BOOK-KEEPING
CONTENTS:
- (a) Meaning of double entry Book-keeping
- (b) Double entry treatment of assets
- (c) Double entry treatment of liability
- (d) Double entry treatment of expenses.
(A) MEANING OF DOUBLE ENTRY BOOK-KEEPING
Double entry book-keeping means every debit entry must have a corresponding credit entry. This is a principle or rule that is followed globally in book-keeping system.
Further Explanation
The fundamental concept of accounting is that every business transaction in money or money-worth has two effects: the receipts of a benefit by one account and the giving of a like benefit by another account. Thus, if a value is given, it is also received. The meaning of this is that where there is a giver, there is also a receiver who is called a debtor. The first Golden Rule of bookkeeping therefore states that, you debit the receiver and credit the giver.
In the process of debiting the account receiving the value and crediting the account surrendering the value, you end up recording every transaction twice, once as a debit entry and again as a credit entry. In effect, every credit entry must have a corresponding debit entry, and every debit must have a corresponding credit entry.
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The double entry system divides the page into two halves as shown above. Every business that is established must have assets, liabilities, and capital
An Asset is anything of value that is owned by a business. A liability is an amount owed by a business to others, while Capital is the total investment in a business.
Therefore, an account is opened for every asset owned by a business and every liability owed by the business. Each account has a separate title and page given to it
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