BIT 163

INTRODUCTION TO ACCOUNTING

CHAPTER FOUR

LEDGER The Double Entry SystemThe definition of Double Entry System are as below:-Double entry shows that every transaction affects

two items.-that is, each transactions which occur in business

must enter twice in book keeping-its mean for each transaction, a book keeping entry

will have to be made to show an increase or decrease of one item, and another entry to show the increase or decrease of the other item.

-so double entry system shows a debit entry and a credit entry for each transaction.

LEDGER The Double Entry SystemLedger is define as a set of accounts which use to record

each transaction in the business with using double entry system

Ledger is divided into two type of ledger as per below:a. General Ledgerb. Subsidiary Ledger

General Ledger-use to record all non personal accountse.g.: purchase account, sales account, wages account,

capital account and other non personal accounts.Subsidiary Ledger-use to record all personal accountsDivides by two:i. Purchase Ledger-we will record all the creditors

account.ii. Sales Ledger-all the debtors account.

THE ACCOUNTS FOR DOUBLE ENTRY-Each account should be shown on a separate page in the

accounting books.-The double entry system divides each page into two

halves.-The left hand side of each page is called debit side, while

the right hand side is called the credit side.-accounts divided into 10 groups which 5 or the accounts

always be debit side (if the amount is increase) and another five will be in the credit side (if the amount is increase)

Illustration

Debit (If the amount of the account increase) Credit (If the amount of the account increase)

Asset Liability

Purchases Sales

Return Inwards Return Outwards

Expenses Revenue

Drawings Capital