What Is Double Entry Bookkeeping System? Vishal Thakkar

This video explains the 4 building blocks of double entry bookkeeping system. Learn all about what it is and how to handle it by your own Finance Guru, Vishal Thakkar.

Ladies and gentlemen boys and girls welcome back to finance to your friend and finance guru vishal thakur is here today with basic building blocks of finance yes finance is built on four basic blocks and today’s video aptly titled as double entry bookkeeping system will explain how these four blocks work so the four blocks are income expense asset and liability so

What have these four blocks well the first two come from pnl the other two come from balance sheet these four blocks give us the basic understanding of how accountancy is created and how every transaction has two effects so if you take any any financial transaction it will have two effects one on the cash flow that is either the money comes in or money goes out and

Second is either it’s an income expense asset or liability well it’s very important to understand here if you see the income and liability are in same color an asset and expense are in same color now why do you think that we would have done so only for decoration no not surely there’s a logic behind it so what is the logic the logic is that income and liability an

Asset and expenditure are linked with the most important word in business called cash flow how let me explain every time money comes in to the business it is either an income or a liability every time our money goes out of the business it is either expense or asset wanna try let’s take a few example for example salary received so tell me if you receive salary from

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Your point of view and not company’s point of view money is coming in or going out coming in right now think whether this inflow does it have any repayment obligation do you repay your salary to anyone no then it’s an income so whether a cash inflow is an income or a liability is decided by the presence or otherwise of repayment obligation so let’s take another

Example you take a housing load so money is again coming into your pocket now tell me is it income or liability it’s a liability why because you have to repay this money to the bank over a period of time so are we very clear that every cash inflow will be income or liability depending on the presence or otherwise of the repayment obligation let’s go to the other

Side let’s take an example that you paid rent for this month so this is a cash outflow now tell me whether this is an expense or an asset of course an expense why because in one of our videos called capital expense versus revenue expense we discussed that whenever there is a cash outflow we have to think whether the corresponding benefit is of a short-term nature

Or a long-term nature in case of rain the benefit is of course of short term is because everyone here to pay rate if you don’t pay rent of next month the landlord will throw you out of the house so it’s an expense let’s take another example you buy a house this is a cash outflow oh yes it is the biggest cash outflow of life however look at the benefit the benefit

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Is of long-term yes longest of long-term once you buy a house nobody will throw you out right so it’s an asset so these are four building blocks of finance which are linked with cash flow income expense asset and liability income and liability are related to cash inflows whenever cash comes in check for repayment obligation if there is no repayment obligation

It’s an income if there is a repayment obligation then it’s a liability asset an expense are linked to cash outflows check for corresponding benefit if a cash outflow entails a short term benefit then it’s an expense if it entails a long term benefit then it’s a asset if you liked our videos and if you feel that this can benefit to students professionals housewife

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Sellers and fourth position on the best seller list finance for non-violence internal rate of return is technically defined as the rate at which project breaks even or the rate at which the project cash flows are recovered


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What Is Double Entry Bookkeeping System? Vishal Thakkar By Finance Tube

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