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GeekInterview.com > Interview Questions > Accounting
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Question: what is double entry book keeping
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| August 08, 2008 03:46:11 |
#7 |
| vasudeo007 |
Testing Expert Member Since: July 2008 Total Comments: 51 |
RE: what is double entry book keeping
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Double entry book keeping system was first mentioned by "Luca De Bargo Pacioli" in his book Summa de arithmetica in 1494.He was a classmate of Leonardo Da Vinci. The book Summa De Arithmetica was basically about maths and arithmatics. But double entry book keeping system is only mentioned in that book as a chapter.
The basic principle of double entry book keeping system is that each and every transaction has two effects which are opposite to each other. Say when you buy something for cash then that thing "comes in" and cash "goes out". So the transaction must be recorded in 2 places or in 2 accounts.
This system bifurcates the accounts into 2 personal and non-personal. The non-personal accounts are further bifurcated into real and nominal. So in a nutshell the accounts are
a) personal,
b) real and
c) nominal accounts.
The system also states which books need to be maintained.They are:
a) cash book,
b) subsidiary book,
c) ledger,
d) general ledger,
e) Trial Balance and
f) trading/profit and loss a/c and Balance sheet.
Vasudeo. |
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