Q.Explain the meaning of the Double Entry System of book-keeping and state its main features.

This chapter builds the whole of Book-Keeping and Accountancy on one system, so its meaning and features are worth learning precisely from the start.

The Double Entry System is a complete, scientific system of recording every business transaction on the principle that every transaction has two aspects — equal in amount and opposite in nature — both of which are recorded in the books. Its main features are that every transaction affects at least two accounts, one is debited and the other credited for an equal amount, and the system is self-balancing (checkable through a Trial Balance).

The Double Entry System is a complete and scientific system of recording business transactions on the principle that every transaction has two aspects, equal in amount and opposite in nature — a debit aspect and a credit aspect — both of which are recorded in the books of account. It was described by the Italian mathematician Luca Pacioli in 1494 and remains, essentially unchanged, the basis of accounting used by businesses of every size across the world.

Its main features are:

1. Every transaction affects at least two accounts — there is no transaction under this system that touches only one account.
2. One account is debited and another credited for an equal amount — the total of all debits for a transaction always equals the total of all credits.
3. Both aspects are recorded — the receiving aspect (debit) and the giving aspect (credit) are captured in the same books.
4. It follows a fixed set of rules (the Golden Rules and the Modern Rules) that decide, for any account, whether to debit or credit it.
5. It provides a complete record of every transaction, unlike the incomplete Single Entry System.
6. It is self-balancing and self-checking — because total debits always equal total credits, a Trial Balance can periodically test the arithmetical accuracy of the books.

Students sometimes describe the Double Entry System as simply "writing an entry twice" — the correct idea is that a SINGLE transaction is recorded through its TWO DIFFERENT aspects (one account debited, a different account credited), not the same entry duplicated.