Class 11 Accountancy Notes · GSEB

Methods of Preparing Accounts

Methods of Preparing Accounts — Explore two accounting systems (Deshi Nama and Double Entry) and three accounting bases (mercantile, cash, hybrid). GSEB Class 11 Commerce Accountancy notes.

Last updated: 1 Aug 2026

Notes

Two Systems — Deshi Nama vs Double Entry

Two types of accounting systems exist: Deshi Nama (ancient Indian method) and Double Entry (Western system). Both are permissible. In present time, double entry system is more popular because accounts are prepared through computers rather than manually written.

Deshi Nama vs Double Entry System
Aspect	Deshi Nama System	Double Entry System
Origin	Ancient Indian method	Western system, fathered by Luca Pacioli
Used by	Sole proprietors and partnership firms	All business forms (sole, partnership, company)
Current usage	Gradually reducing	Dominant — computer-based accounts
Recording	Manual, single-sided	Computer-based, double-sided (debit and credit)
Rules	Traditional practices	Standardized debit-credit rules

Double Entry System was fathered by Luca Pacioli (mathematician of Italy). It is based on rules of debit and credit. Three basic rules = pillars of double entry system. Correct understanding of rules = correct understanding of double entry system.

Three Accounting Bases

Accounts can be prepared on three different bases. The mercantile (accrual) base is the most popular and is used in all chapters of this book.

Mercantile (Accrual) Base

1/3

Most popular method. All transactions of respective year are considered — whether cash received/paid or not. Includes outstanding expenses, prepaid incomes, incomes received in advance, and expenses paid in advance.

Example:

Accounts for 1-4-2014 to 31-03-2015. Salary ₹ 5,000/month. March salary outstanding:
Salary paid for 11 months: 5,000 × 11 = ₹ 55,000
Salary outstanding for 1 month (March): ₹ 5,000
Total expense for 2014-15: ₹ 60,000

In practice, excluding certain sectors, all other sectors maintain accounts under mercantile system.

Key Takeaways

Two accounting systems: Deshi Nama (ancient, manual, declining) and Double Entry (modern, computer-based, dominant).
Double Entry system was fathered by Luca Pacioli and is based on debit-credit rules.
Three accounting bases: Mercantile/Accrual (most popular, used by companies), Cash/Receipt (limited use), and Hybrid/Mixed (not popular).
In India, companies must use the mercantile system per Accounting Standard 1.