 Hello everyone, I welcome you to this session. In this session, we will discuss the second part of the unit 4, Accounting Process 1 or Financial Accounting of Become for Semester. In this session, we will discuss two important aspects. Number one, the system of bookkeeping and secondly, we will see the classification of accounts. Generally, when we record the business transactions in books of accounts, we follow a particular system. That system is known as double entry system of bookkeeping. So, we will discuss the double entry system of bookkeeping. This double entry system of bookkeeping is based on a particular accounting concept. That concept is known as dual aspect concept. According to this concept, each transaction will have two accounts. Means, there will be two aspects of the same transactions. In the first part video, we have shown the format of a particular account. Then, we have discussed the term debit and credit. So, in a particular account, there are two sites, debit and credit. So, that particular format is based on the double entry system. The double entry system of bookkeeping is based on dual aspect concept and each aspect of every transaction will be recorded in a particular account and directed account. So, two aspects will be recorded under the double entry system of bookkeeping whenever a particular transaction takes place in the business. And this debit and credit will be equal. So, let us again recapitulate the format. That on a particular site, we have recorded that particular JF amount. That is the left side, debit side, DR. And on the other side, we have written as CR credit side with the same column name, debt particulars JF amount. So, whenever a transaction takes place on that particular day, we will record the debt, the details of the transaction and we will give certain amount of the transaction and the journal folio is there. So, how to record the transactions in this particular format? But before discussing that, let us first discuss the features of this particular system, the double entry system of bookkeeping. In this particular system, transaction takes place only if there are two parties. So, you can take an example that a transaction takes place between me and you. So, one party will receive certain benefit and the other party will give some benefit. So, I may receive something and on the opposite side, you may give something. So, that transaction will take place if there are two parties. That is, in this particular site, I am here and you on the other side, we are transacting something. So, each party is affected in opposite direction, but with the same amount. Let us take the example that I have purchased some goods for an amount of rupees 2000. So, I have purchased this. I bought these items and I paid rupees 2000 against that to you. So, I got the items and you get the money. So, the items will be what rupees 2000? I have, these items are with me and I paid rupees 2000, the equal amount to you. So, you have rupees 2000 in your account or in your hand. So, the same transaction affected both the parties related in the transaction. So, the changes are recognized from the point of view of the party whose books of accounts are being recorded. So, each transaction, I will record my aspect in my books of accounts and you will record your aspect, the impact of that particular transaction in your books of accounts from your point of view. So, the same transaction, the same amount, but the recording will be takes place in a different way. So, I will record my aspect in my books of accounts, you will record your aspect in your books of accounts, but the relation will be same means the amount will be same. So, changes are recorded in the two related accounts in the books of the party in whose books recording is being done. So, we have to first think in which books of accounts will record that particular transaction. From my side, in our example, I will record in my books of accounts the purchase transaction because I have purchased it. So, purchase and I have paid rupees 2000 to you. So, I will record it in my cash book also that I have paid rupees 2000. So, this is my aspect. If you consider your aspect, then for you in your books of accounts, you have to record it as a sale transaction because you have sold me the goods. So, one aspect will be sale in your books of accounts and the other aspect will be the cash that you have received 2000. Means you have sold for rupees 2000 and you have received cash 2000. Amount will be same in my book also, in your book also. Two aspects, in your case it is sale and cash. In my case, it is purchase and cash. So, the amount will be same, but the two aspects are recorded. So, these are the features and the process of double entry system. Now, let us see what are the advantages of this particular system. This is the scientific system. So, if I wrongly recorded a particular aspect, suppose in my books of accounts I have recorded it like purchase for rupees 3000 instead of rupees 2000, but when I have recorded it in the cash book, the case aspect, I have recorded it rightly 2000. So, these two amounts will vary and it will show that there are some mistakes in the recording purpose. So, this system is very scientific and any, it is largely purpose of correcting all the entries mathematically. So, it records the whole transaction. It is a complete record. I have recorded two aspects, purchase and cash. You have recorded under double entry system in your books of accounts as sale and cash. So, it will check automatically arithmetical accuracy. Then you can ascertain the results of the business activities. So, we are placing the similar type of transaction that we have discussed. So, in your case the sale will be rupees 2000 and in my case the purchase will be rupees 2000. So, we can ascertain the results of the business that it is the amount that we have spent for purchase. Then accordingly you can ascertain the financial position at the end of a particular period of time. So, these things are automatically generated when we will follow this double entry system of bookkeeping. However, there are certain disadvantages also. Number one, requirement of expert knowledge means for recording the transactions under double entry system of bookkeeping, we must know the various aspects of this particular system. Then it is lengthy and cumbersome. In this process we first record a particular transaction in journal book. Then we will record it. Means we will post it from journal to another set of books that is the ledger book. Then we will prepare trial balance. Then final account. So, it is a quite lengthy process and needs the expert knowledge. It is expensive. We have to record the different transactions. We have to have various books of accounts. Then maybe we have to appoint some accountant etc. etc. So, it involves cost. And generally it is termed as unsuitable for small organization as the transactions are very less. However, in spite of these disadvantages, this system provides the efficiency in the whole accounting system and you can readily ascertain the results of your business. Now, let us discuss the classification of accounts. When we will discuss this particular aspect, we can follow two approaches. Number one, traditional approach also known as English approach. Then number two, American approach also known as modern approach. Another traditional approach, we generally classify the accounts as personal account and impersonal account. Again, under personal account we have different types of accounts. Accounts of natural person like you and me, Mr. Ram, Mr. Sita, Mr. Jodu etc. All natural persons. Then accounts of artificial persons means the accounts of corporates, accounts of some organizations. For example, the accounts of my supplier, account of the land company etc. These are all artificial persons and for accounting purpose we will record it as a personal account. Then representative personal account. So, these things will be discussed later on also. Again, we have another classification, impersonal account. So, under impersonal account we have two types of accounts. Real account generally indicates the properties of the business and number two, nominal account generally indicates the expenses and losses and incomes and gains. Under American approach, we classify the accounts in a different way. In the five different accounts. So, under this approach we have assets account, the assets of the business, liabilities in the amount due by your business to some other business or to some other person. Different liabilities may be bank loan etc. So, assets account, liabilities account, then the third one is capital accounts. Capital means the amount invested by you in your business, then revenue accounts, the income that business earn, expenses accounts. So, accordingly we will classify the transaction in different accounts if we follow the American system in classifying the accounts. So, this is all about the double entry system and classification of accounts. In the third part, we will discuss some other aspects of the same unit. Thank you.