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Unit 2: Double Entry System

governments across the globe now follow the double entry accounting system. We need to Notes
switch to double entry quickly,” he added.
He clarifi ed his statement by stating: “I am not saying that the Government accounts are
not perfect. We need to ensure better transparency. The double entry accounting system
would help measure cost escalation, go into the details of total public expenditure and so
on.”
The Vice-President of ICAI, Mr G. Ramasamy, said that the Governmental outgo towards
the Mahatma Gandhi National Rural Employment Guarantee Act Scheme totalled over
` 42,000 crore and there were over 6 lakh panchayats in the country preparing their
expenditure statement. “The institute is supporting the panchayats prepare the statement,”
he said.
On implementation of International Financial Reporting Standards (IFRS), he said by July
31, all approvals would be in place. The institute has started programmes to enlighten

professionals and jumpstart the process in India, launched certification course on IFRS.
“In the first phase, we have started with Nifty companies with a turnover of over ` 1,000

crore.”
The institute, he said has inked MoUs with its various international counterparts to augment
bilateral relationships. “We recently interacted with professional bodies in West Asia,
discussed the need for improving networking ties between members and professionals
of the two countries. We are looking to enter into mutual recognition agreements with the
professional bodies in Canada, Singapore and New Zealand among others,” he said.
Source: http://www.thehindubusinessline.in/2010/07/05/stories/2010070551931300.htm

2.5 Summary

z Double Entry Mechanism entails recording of transactions keeping in mind the debit and
credit aspect of the transaction.
z To record every transaction, one account is debited and the other is credited. This is based
on the principle ‘every debit has a credit’.
z The Double entry Book-keeping seeks to record every transaction in money or money’s
worth in its dual aspect.
z Rules of debiting and crediting are:
™ Personal A/c – Receiver – Debit and Giver-Credit

™ Real A/c – What comes in – Debit, What goes out – Credit
™ Nominal Account – Expenses and Losses are Debited and Income and Gains are
credited

2.6 Keywords

Cash System: In case of cash system, transactions are recorded only if cash is received or paid.

Mercantile System: Mercantile system is one where both cash and credit transactions are
recorded.
Nominal A/c: Accounts which are relating to the revenues, incomes, expenses and losses of the
business are called nominal accounts.

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