Double-Entry

What is it?

Double entry in bookkeeping, is when corresponding entries are entered as a debit and credit into the accounts.

This system of bookkeeping is underpinned by the accounting equation.

Assets = Capital + Liabilities

When allocating transactions, the double-entry method is as follows:

  • ASSETS
    • to increase – Debit
    • to decrease – Credit
  • CAPITAL
    • to increase – Credit
    • to decrease – Debit
  • LIABILITIES
    • to increase – Credit
    • to decrease – Debit

A helpful way to remember the double entry system when bookkeeping is to debit the receiver and credit the provider.

An example of this is if goods are purchased, this would show as a debit in the purchase account and credit in the bank account.

Double-entry bookkeeping is essential for financial reporting.

When thinking about the reports, the double entry system is best reflected within the Balance Sheet or now more commonly known as a statement of financial position.

If using accounting software the double entry process is automated often resulting in less accounting errors.

Double-Entry helps create balance in your business accounts.

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