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Question 7

Explain the double entry mechanism with an illustrative example.


Double Entry mechanism is the most progressive, scientific and complete system of recording the financial transactions of a business. According to this system there are two accounts involved in every business transaction.One account receiving a benefit and the other account yielding a benefit. The person or the account receiving a benefit is debited and the person or the account who gives something to the business is credited.

For example- we received ₹20,000 from Mohan. This transaction affects two accounts- Cash Account and the Johan's Account.

Cash account is receiving a benefit (as cash is coming in) and hence Cash account will be debited, whereas Mohan is yielding a benefit and hence his account will be credited.

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