Introduction - Double Entry System Commerce Notes | EduRev

Crash Course of Accountancy - Class 11

Created by: Nipuns Institute

Commerce : Introduction - Double Entry System Commerce Notes | EduRev

The document Introduction - Double Entry System Commerce Notes | EduRev is a part of the Commerce Course Crash Course of Accountancy - Class 11.
All you need of Commerce at this link: Commerce

Double entry System

Meaning of double entry system:

As per this system every business transactions affects two accounts in opposite directions i.e. if one account will debited, the other will be credited.

Principles of double entry system:

1. Every business transaction affects two accounts.

2. Records both the personal and impersonal aspect.

3. Recording is made as per specified rules.

4. Preparation of Trial balance.
Introduction - Double Entry System Commerce Notes | EduRev

1. Personal accounts:

- The accounts which relates to the individual, firm, Company or an institution is called as personal

- Ex: mohan a/c, dps a/c, capital a/c or drawings a/c

- Rule: Debit the receiver, credit the giver.

Types of personal accounts

a. Natural personal account:

Accounts of natural persons, means accounts of

b. Artificial personal account:

These are the accounts on the name of the firms or institutions, they do not have any physical existence but they act like the human beings. Ex: dps a/c, reliance a/c, icici bank a/c.

c. Representative personal account:

When an account represents a particular person or a group of persons it is called as representative personal account. Ex: outstanding salaries (represents those group of persons to whom salary is due and not paid).

2. Real account:

- The accounts of all the assets or those things which are valuable to the business are called as real account.

- Rule: Debit what comes in, credit what goes out.

Types of Real account

a. Tangible Real account:

It includes all the tangible assets (assets which can be seen, felt, touch and seen.) Ex: land, plant.

b. In-Tangible Real account:

It includes all the intangible assets (assets which cannot be seen, felt, touch and seen.) Ex: goodwill, pate.

3. Nominal accounts:

- It includes all the expenses, losses and incomes & gains. Ex: interest, salary, commission received and bad debts.

- Rule: Debit all the expenses& losses, credit all incomes & gains

-Whenever any word(prefix or suffix) is fixed with the nominal account it becomes a personal account.

Nominal account
Personal account
1. Rent account
Outstanding rent, prepaid rent.
2. Salary account
Outstanding Salary, prepaid Salary
3. Commission account
Outstanding Commission, unearned commission or accrued commission
4. Interest account
Interest Outstanding, Interest accrued


Stages of double entry system:

1. Recording in the books of original entry(journal or subsidiary books)

2. Classification into ledger.

3. Summary (preparation of trial balance, financial statements{trading and profit and loss account})

Advantages of double entry system:

1. Scientific system.

2. Complete record of every business transactions

3. Preparation of trial balance.

4.Preparation of trading and profit and loss a/c.

5. Lesser possibility of fraud.

6. Legal approval.

Disadvantages of double entry system:

1. Expensive(as a number of books are maintained )

2. It is difficult to apply the rules of debit and credit.

3. Affected by errors: error of omission, commission and principles.

1. Classify the following Accounts into Personal, Real or Nominal Accounts :

1. Capital; _________________________________

2. Drawings; _________________________________

3. Cash paid; _________________________________

4. Cash received; _________________________________

5. Commission paid-. _________________________________

6. Commission received; _________________________________

7. Purchases A/c; _________________________________

8. Sales A/c; _________________________________

9. Furniture A/c; _________________________________

10. Cash A/c: _________________________________

11. Bank A/c; _________________________________

12. Bank Overdraft A/c; _________________________________

13. Debtors A./c; _________________________________

14. Creditors A/c: _________________________________

15, Travelling Expenses; _________________________________

16. Goodwill; _________________________________

17. Patents; _________________________________

18. Salary A/c; _________________________________

19. Salary, _________________________________

20. Outstanding Insurance A/c; _________________________________

21. Insurance Prepaid A/c; _________________________________

22. Bad Debts written off; _________________________________

23. Bad Debts recovered. _________________________________


Q2. Classify the following accounts into Personal, Real or Nominal accounts : -

I. Machinery VII. Drawings

II. Capital VIII. Salary

III. Stock IX. Outstanding Salary

IV. Bad Debts X. Insurance

V. Goodwill XI. Prepaid Insurance

VI. Sales XII. Interest Received

[Ans:]

Personal Accounts II, VII, IX, XI

Real Accounts I, III, V

Nominal Accounts IV, VI, VIII, X, XII. ]

Q3. State to which class of accounts does each of the following relate:-

I. Cash V. Creditors

II. Bank VI. Commission Received

III. Trade Marks VII. Accrued Commission

IV. Debtors VIII. Commission Received in Advance

[Ans:]

Personal Accounts II, IV, V, VII, VIII.

Real Accounts I,III.

Nominal Accounts VI. ]

Q4. Classify the following accounts under personal, real or nominal accounts:

(i) Commission paid

(ii) Commission received

(iii) Commission Accrued

(iv) Prepaid salaries

(v) Leasehold property A/c

(vi) Discount allowed

(vii) Carriage inwards A/c

(viii) Discount allowed

(ix) Drawings A/c

(x) Rent Received in advance

(xi) Debtors

(xii) Sales A/c

(xiii) Rent paid in advance

(xiv) Bank overdraft

[Ans:]
Personal accounts : (iii), (iv), (viii), (ix), (xi), (xiii), (xiv)

Real Accounts : (v)

Nominal Accounts : (i), (ii), (vi), (vii), (xii)]

Offer running on EduRev: Apply code STAYHOME200 to get INR 200 off on our premium plan EduRev Infinity!

Complete Syllabus of Commerce

Dynamic Test

Content Category

Related Searches

Introduction - Double Entry System Commerce Notes | EduRev

,

Introduction - Double Entry System Commerce Notes | EduRev

,

past year papers

,

Semester Notes

,

Sample Paper

,

study material

,

video lectures

,

Viva Questions

,

shortcuts and tricks

,

mock tests for examination

,

Summary

,

Objective type Questions

,

Introduction - Double Entry System Commerce Notes | EduRev

,

MCQs

,

Important questions

,

Free

,

pdf

,

practice quizzes

,

Previous Year Questions with Solutions

,

ppt

,

Exam

,

Extra Questions

;