There are five stages of double entry system of accounting.
1. First stage: When the transaction takes place, it is recorded in aprimaiy
book called journal, when the business is big one subsidiary books. Primary
book called joumal. When the business is a big one. subsidiary books of journal
are kept .Thus, recording in journal or in its subsidiary book is the first stage
of double entry system. It is also know as original record stage.
2. Second stage: Records of journal or its subsidiary books are transferred
in a classified form to another book which is called ledger. These classified
groups are technically known as accounts. Postings in ledger and it,
maintenance is the second stage of Double Entry System. It is also know;
classification stage.
3. Third stage : Balance of each account in ledger is found out and is
transferred to a statement which is called trial balance. Thus preparation of
trial balance is the third stage of Double Entry System of accounting.
4. Fourth stage : From Trial balance, final accounts are prepared. Final
aks include trading A/c, profit and loss accounts and balance sheet. In case of
manufacturing concern, before trading accounts manufacturing account is also,
prepared. Preparation of manufacturing accounts, trading accounts, profit and
loss A/c. and balance shut is the founh stage of Double Entry System of
accounting.
5. Fifth stage : After preparation of final accounts and analysis and
interpretation these accounts are made in order to have true and fair idea
about the earning capacity and financial position of the business. This is the
fifth stage of accounting.
