Preparing the Ledger Accounts

Abstract

The principle of double entry book keeping hinges on the fact that there are two parts to all financial transactions. If an off-licence purchases champagne they acquire a stock of champagne, but at the same time they have to pay for it, which means they have less cash as a result. In the same way when they sell the champagne they will reduce their stocks but they will receive cash. With financial transactions which do not include credit the firm is exchanging its cash either to acquire new assets or to pay expenses. The transactions of Jumps, Memories and Snack on Wheels illustrate the principles involved.