Summary History of accounting

CHAPTER 1
Study Notes

, Nature and Function of
Accounting

The Double Entry System
→ This system is defined as an accounting system in which there was a debit and a credit
entry for each transaction.
EMPLOYMENT OF FUNDS IN ENTITY GENERATION OF FUNDS WHETHER
= INTERNALLY OR EXTERNALLY
DEBIT Credit




Duality concept




ASSETS EQUITY +LIABILITIES
=
DEBIT Credit


→ Assets, Equity and Liabilities will each have both a debit and credit side. Each type
assets, equities and liabilities will each have its own account (in General Ledger)
ASSETS
Transactions that will increase assets will be Transactions that will decrease assets will be
recorded on the debit side recorded on the credit side
EQUITY
Transactions that will decrease assets will be Transactions that will increase assets will be
recorded on the debit side recorded on the credit side
LIABILITIES
Transactions that will decrease assets will be Transactions that will increase assets will be
recorded on the debit side recorded on the credit side

→ The nature of the double entry system can be understood by recognising that this
system did not only record the goods that are traded with, but also for a business to
keep track of assets and liabilities and to calculate profits and losses. The double entry
system also had other effects such as honesty and accuracy.