Definition: Double entry book keeping is the system of keeping account, which take advantages of the two-fold aspect of every transaction, whereby one account that receives is debited and another account, which gives, is credited.
The following simple rules of double entry should be fully understood and memorized.
a. for every credited entry in an account there must be a corresponding debit entry in another account.
b. For every debit entry in an account, there must be a corresponding credit entry in another account.
c. All transactions must be recorded in two accounts, one account is debited and another account credited.
APPLICATION OF THE PRINCIPLES OF DOUBLE ENTRY
1. Any transaction involves two accounts.
a. Receiving account or receiver.
b. Giving account or giver.
a. Dr. Receiving account = With value it receives
b. Cr. Giving account = With value it gives out.
Illustration: Complete the following table. Account to be.
| Debited | Credited | ||
| i. | Start business with | Cash | Capital |
| ii. | Goods sold on credit to Mr. Ayo | Ayo | Sales |
| iii. | We paid creditor Mr. Olu by cheque | Mr. Olu | Bank |
| iv. | Goods bought by cheque | Purchases | Bank |
| v. | Sold goods for cash | Cash | Sales |
| vi. | Goods were returned to Mr. Kufor | Kufor | Returns Outwards |
| vii. | Biodun lent us | Cash | Loan (Biodun) |
| viii. | Took | Bank | Cash |
| ix. | Bought a motor van by cheque | Motor van | Bank |
| x. | Goods were returned to Olotu | Olotu | Returns Outwards |
| xi. | Paid further cash into the business as capital | Cash | Capital |
POSTING OF TRANSACTIONS FROM CASH BOOK TO LEDGER
POSTING TO THE LEDGERS.
Posting is the act of using one book as a means for entering the items to other accounts so as to complete double entry. When applying the principle of double entry, students are advised to write up the cash book first and then transfer to the ledgers.
Rules to be followed
1. All items on the debit side of the cash book must be transferred to the credit side of individual ledgers.
2. All items on the credit side of the cash book must be posted to the debit side of individual ledgers
Illustration:
Enter the following in a two column cash book. Balance off at the end of the month and post to all necessary ledgers.
June 1: Started business with cash N3,200
June 2: The following paid us by cheque, Okon N500 : Abbey N600
June 3: Cash sales paid directly into the bank N400
June 5: Paid rent by cash N180
June 6: We paid the following account by cheque; Sope N520 : Ladi N300
June 7: Withdrew cash from the bank for business use N70
June 8: Commission received by cheque N450
June 10: Banked cash N150
June 12: Withdrew cash from bank for personal use N30
June 15: Paid wages by cash N250
June 16: Bought motor van by cheque N20
June 18: Cash sales N1,000
June 20: Bought stationery paying by cash N170
June 22: Received N200 cheque from Okete
June 23: Cash purchases N550
June 24: Cash drawings N120
June 25: Bought goods by cheque N115
June 27: Yinka lend us N1,020 cash.
June 28: Paid motor expenses by cheque N18
June 30: The proprietor put further cash N1,320 into the business as capital.
ASSIGNMENT
1. Write up the two column cash book in simplified and amplified book-keeping and accounting page 56 revision question 5x.
Note: Post the entries from the prepared two column cash to all relevant ledger account
2. You are required to write up the accounts for the following transactions.
Jan. 1 Started business with N12,000 in the bank.
Jan. 2 Bought stationery on credit from Okete N200
Jan. 3 Bought goods on credit from Ogundele N3,000
Jan. 6 Paid rent in cash N30
Jan. 8 Sold goods on credit to Ajala N500
Jan. 12 We returned goods to Ogundele N150
Jan. 19 Paid wages in cash N30.
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