Double Entry
You will learn the rules of double entry accounting, understand what debits and credits mean, and how they work together in double entry. You will also learn how to accurately record business transactions using the double entry system.
Related Lessons:
Rules of Double Entry
The double entry of accounting means that for every transaction,
- At least two different accounts are affected
- One account is debited, and the other account is credited
- Total amount debited must be equal to the total amount credited
We also learnt that Debit is not definitely a plus and Credit is not definitely a minus. It depends on the nature of the accounts.
For Assets, Expense, Drawings accounts: Debit is a plus, Credit is a minus.
For Liability, Income, Capital accounts: Debit is a minus, Credit is a plus
Recording Using Double Entry
When we record a transaction using double entry rules, we will need to carry out the following steps:
Step 1: Identify the accounts affected
Step 2: Determine the accounts to increase or decrease
Step 3: Categorise the accounts into Assets, Liability, Capital, Drawings, Income or Expense
Step 4: Determine the accounts to debit or credit