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Double entry system

In the double entry system of bookkeeping, two entries are made to two different accounts whenever a transaction takes place. Each of the two entries is made to show an increase or decrease in the balance of the affected accounts.

Accountant

Every account is divided into the left-hand side known as the debit side, and the right-hand side called the credit side. The name of the account is shown at the top of it. As information of each transaction is entered in the books, there will always be two entries – a debit entry and a credit entry – of same amount so that the total amount of debit entries always balances the total amount of credit entries.

An entry made in the debit side of an expense or asset account shows an increase in the account while an entry made in the credit side shows a decrease. For a liability or capital account, it is the reverse. A debit entry in a liability or capital account decreases the liability or capital and a credit entry increases it.

There is one account for each item of asset or liability, and all information pertaining to an item is recorded in its account. Thus all information relating to machinery will have to be entered in the machinery account. Likewise, an account for office furniture will contain all information of office furniture.

Let’s look at a transaction. You paid $200 cash for the purchase of a piece of furniture. The following two accounts will be recorded.


Furniture Account

Date Particulars Folio Amount
Date Particulars Folio Amount



$




20XX







Apr 1 Cash
300





Cash Account

Date Particulars Folio Amount
Date Particulars Folio Amount








$





20XX







Apr 1 Furniture
300


Last Updated (Saturday, 25 September 2010 19:09)