Business Studies

Principle of Double Entry explained

len Alfred Ajibola - Tue, 12th February, 2019 @ 2:32 PM

Topics in Business Studies

Business Structure: What is a business structure? Advantages and Disadvantages of franchise What is a franchise? Types of franchise What is Corporation? Types, Advantages and Disadvantages of Corporations What is Limited Liability Company? Its Advantages and Disadvantages Partnership in Business: Types, Advantages and Disadvantages Business Studies: What is Business Studies and Business? Management: Elements of Management What is Management? Importance of Management Advantages and Disadvantages of Air Transport Advantages and Disadvantages of Rail Transport Methods of Payment: Cheque - What is a Cheque? Cheque: Types of Cheque Cheque: Characteristics of Cheque Advantages and Disadvantages of Cheque Advertising and Types of Advertising Advantages and Disadvantages of Road Transport Advantages and Disadvantages of Water Transport Consumer Protection - Agencies of Consumer Protection Consumer Right and Protection


Academic Questions in Business Studies

Please check out our Test Your Knowledge page to see all Questions and Answers

An accounting system focused primarily on a balanced debit and credit side is termed _____.

  • A. Ledger system

  • B. Journal system

  • C. Double entry system

  • D. Balance sheet system

  • E. Principle of accounting system

  • F. Balanced accounting system

With regards to money, which of the following statement is incorrect?

  • A. Money is crucial for the survival of every human being

  • B. Money is completely advantageous

  • C. Money is defined as anything that is generally accepted as a medium of exchange

  • D. Monopoly is said to exist when money and wealth exists in the hands of a few

  • E. Excess money in an economy can lead to inflation

  • F. When a person receives money that isn't commensurate with the job he or she had done, then that's underemployment

Which of the following statement is wrong with regards to business?

  • A. Business involves the exchange of something for another thing or money

  • B. Business is an economic activity

  • C. In business, profit goes beyond money

  • D. Businesses do not have social responsibilities to their customers

  • E. The exchange of services is an aspect of business

  • F. Businesses can be affected by government policies

Consumer _____ are the laws and methods put in place by various agencies so that consumers can enjoy maximum satisfaction on the goods they buy and services rendered to them.

  • A. Protection
  • B. Policy
  • C. Rights
  • D. Defence
  • E. Guide
  • F. Safety

Which of the following is not a characteristics of business?

  • A. The buyer and seller must always come into a contract agreement

  • B. Risk from unforseen circumstances is involved

  • C. They are subject to policies made by the government

  • D. All business transaction is aimed at making profit

  • E. It requires a discontinuous transaction between the buyer and the seller

  • F. Investments are required to begin a business

Which of the following is not a Right of Consumer Protection?

  • A. Right to Education
  • B. Right to Choose
  • C. Right to Safety
  • D. Right to the Good things of Life
  • E. Right to be Assured
  • F. Right to Compel

Which of the following is NOT a government agency of consumer protection?

  • A. Ministry of Sports
  • B. Ministry of Commerce
  • C. Consumer Protection Council
  • D. Ministry of Health
  • E. Ministry of Environment
  • F. National Drug Law Enforcement Agent

Define Consumer Protection.

LEN ACADEMY SMART SCHOOL SOFTWARE

Image

Read more on its smart academic features here

Please click here to kindly support education


Double Entry System:

Just as we have two sides to a coin, so also are there two sides to every transaction. For instance, in order to purchase a phone from a local store, you will need to pay some money to the store attendant before you can own the phone.

The above simple transaction has two sides from the perspective of the buyer (you) and the seller (store attendant). From the transaction, your money would have been decreased by the amount you paid for the phone while the seller would be short of a phone. Conversely, you will own a new phone while the seller’s cash balance would have increased by the amount you paid for the phone.

You can read on the advantages and limitations of the double entry system here.

If both parties (the buyer and seller) were to take a record of the transaction, each record will have two sides.


Below is an illustration of the above transaction:

From the buyer's record (you); one half (called the debit side of the account) will reflect an increase in expense because you paid out money to own the phone while the other half (credit side of the account) will reflect an increase in asset because the phone becomes yours and you may use it for whatever purpose you wish. (The phone becomes an asset for the buyer).

From the seller’s record, one half (debit side of the account) will reflect an increase in labiality due to the resultant absence of the phone from its sale while the other half (credit side of the account) will reflect an increase in income because money was received from the sale of the phone.


Asset accounts are debited when they are increasing while Liability accounts are credited when they are increasing.

Expenses accounts are debited when they are increasing while Income accounts are credited when they are increasing.

Think of 'credit' as 'getting paid'. For instance, if your bank account is credited, that will imply that money has been paid into it.

Think of 'debit' as 'spending money'. For instance, whenever you purchase something, your account will be debited.

Please read on debit and credit cards as methods of payments here.


From the above explanations, a transaction involving two corresponding parties of account is termed Dual Entry of Transaction.

On the debit side (Dr) is the account receiving the benefit while that which gives the benefit appears on the credit side (Cr) of the account.

The process of keeping an account with a debit and credit side is referred to as the Double Entry System.

An accounting system that is based on this principle; 'that for every debit entry made, there must always be a corresponding credit entry' is known as the principle of double entry or duality principle. This principle ensures that whatever is present on the debit must equal that of the credit; that is: 'Debit = Credit'.


Double Entry System - Len Academy

Without the concept of double entry, account records will only present or show a partial view.

You can read on balance sheet reconciliations here.


Sometimes, the confusing aspect of writing a dual entry account is the uncertainly of what to write on the debit and credit sides. This should not be a problem because an understanding of the characteristics or features of debit and credit sides of accounts will aid you in this regard.

Please read on the characteristics of the double entry system here.

Please click here to follow Len Academy on Google News.

Please like and follow our official facebook page here for great educational write-ups.

You can follow Len Academy on twitter here.Thank you.


Kindly share this article via the links below:


len

Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.


Please Register here or Login here to contribute to this topic by commenting in the box below.

CONTRIBUTE TO THIS TOPIC | ASK A QUESTION


Amazing facts in Business Studies

The world's 100 richest people earned enough money in 2012 to end global poverty four times over


NOTABLE POINTS IN Business Studies

Consumer protection refers to the ways or methods through which consumers enjoy maximum satisfaction from the goods they buy and services rendered to them.

The agencies of consumer protection assists in protecting the consumer rights. These agencies may also be referred to as the organs of consumer protection. Basically, we have three of them, they are:

  1. Government Agencies

  2. Independent Agencies

  3. Legislation

Please read on consumer protection here

One of the responsibilities of the government of every nation is to set up agencies or organizations that will protect the interest of the consumers and invariably, the people.

Below are some of the government agencies of consumer protection:

  • National Drug Law Enforcement Agency (NDLEA)
  • National Agency for Food, Drug Administration and Control (NAFDAC)
  • Consumer Protection Council (CPC)
  • Rent Tribunal
  • Ministry of Health
  • Ministry of Commerce
  • Ministry of Transportation
  • Ministry of Environment
  • National Wages and Salaries Commission

Please read on the government agencies of consumer protection here