Answer :

According to the double entry system Each transaction has two sides, one side is debited, other is credited and on each account, there are two sides, debit and credit. The two sides of transactions are recorded ion two opposite side of two separate accounts. For example, you buy stationary using cash, then in cash account, cash will be debited, and the stationary account will be credited, meanwhile, in the stationery account, the stationery account will be credited, and cash will be debited, each entry can be checked from two places.

In the double accounting system, complete accounting is done in three different stages, these stages are mentioned below

1) Primary accounting: It is the recording of business transactions as soon as they take place, and it is done in a primary accounting book. For a small business, it is called journals, but for big business, they have different journals for a different type of transactions, like sale journal to record sale, cash receipt to record cash received etc.

2) Classification and “Khatauni” : - Primary accounting is day based accounting and all the transaction like from whom how much money is taken, what bought and what sold, these transactions are later classified into ledgers, every account have a place in ledger and different accounts are opened in a ledger, like for different people, different things, expenses and income. This classification and sorting are called as posting ledger.

3) Preparation of final accounts: ledgers contain many accounts and still no information can be interpreted using these ledgers, trail balance, profit and loss statement and balance sheet is prepared using these accounts. These statements can be analysed by different stakeholders for different stakeholders and information can be used.

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