Separate Entity Concept
‘The Business’ is treated independently from the persons who own it.
Single Entry Book-Keeping
only one aspect of transaction i.e. either cash receipt or the fact that money is receivable from someone is recorded.
Double Entry Book-Keeping
The concept of double entry is based on the fact that every transaction has two aspects i.e. receiving
a benefit and giving a benefit.
The account that receives the benefit is debited and the account that provides the benefit is credited.
The ultimate result of the system is that for every Debit (Dr) there is an equal Credit (Cr).
DEBIT
• It signifies the receiving of benefit. In simple words it is the left hand side.
CREDIT
• It signifies the providing of a benefit. In simple words it is the right hand side.
Assets
• Assets are the properties and possessions of the business.
o Tangible Assets – Furniture, Vehicle etc.
o Intangible Assets – Right to receive money, Good will etc.
- Any thing that provides benefit to the business in future is called ‘Asset’. (page 14)
- Any thing for which the business has to repay in any form is called ‘Liability’.
Assets = Liabilities
The liabilities of the business can be classified into two major classes i.e. the amounts payable to
‘outsiders’ and those payable to the ‘owners’. The liability of the business towards its owners is
called ‘Capital’ and amount payable to outsiders is called liability. Therefore, our accounting
equation finally becomes:
Assets = Capital + Liabilities
