Double-entry bookkeeping

The double entry system of bookkeeping is based upon the fact that every transaction has two parts and that this will therefore affect two ledger accounts.

Every transaction involves a debit entry in one account and a credit entry in another account. This serves as a kind of error-detection system: if, at any point, the sum of debits does not equal the corresponding sum of credits, then an error has occurred.

Double-Entry, Debits and Credits

Except for some very small companies, the standard method for recording transactions is double-entry. Double-entry bookkeeping or double-entry accounting means that every transaction will involve at least two accounts. To illustrate, here are a few transactions and the two accounts that

NOTE: Double-entry bookkeeping means that every transaction will involve a minimum of two accounts.

Debits and Credits

The words debit and credit have been associated with double-entry bookkeeping and accounting for more than 500 years. Here are the meanings of those words:
debit: an entry on the left side of an account
credit: an entry on the right side of an account

The debit and credit rule in double-entry bookkeeping can be stated several ways:

· For each and every transaction, the total amount entered on the left side of an account (or accounts) must be equal to the total amount entered on the right side of another account (or accounts).

· For each and every transaction, the total of the debit amounts must be equal to the total of the credit amounts.

· Debits must equal credits.

in sort………………….

debit amounts =credit amounts

Double-entry bookkeeping