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, two accounts are involved in every business transaction. One account receives profit and the other account receives profit. The person or account receiving the profit is debited and the person or account giving something to the business is credited.
on 06-07-2021 ABC Ltd. received cash of Rs.5,000 from mr.vijay , so this above business transaction affect two accounts, those are cash a/c and vijay's a/c . in other transactions the accounts may be different different it's depends on transaction that held.
Cash account is receiving a benefit (as cash is coming in) and hence Cash account will be debited, whereas vijay is yielding a benefit and hence his account will be credited.
In the boks of ABC Ltd.
Journal Entry
| Date | Particulars | L.F. | Debit | Credit | |
| 06-07-2021 | Cash A/c | Dr. | 5,000 | ||
| To Vijay’s A/c | 5,000 | ||||
| (Cash received from Vijay) |