• Home
  • Subjects
    • UPSC Commerce Optional
      • Syllabus – UPSC Commerce Optional
      • UPSC Commerce and Accountancy Optional Question Paper
      • Book
        • UPSC Commerce Optional Books – The Marathon of UPSC Commerce Optional
      • Blog
      • Courses
      • Answer Writing Practise
      • News
    • UGC NET – Commerce Optional
      • UGC NET – Syllabus
      • Past Papers
        • July 2018-Commerce
        • Dec 2017-Commerce
        • June 2017-Commerce
        • Dec 2016-Commerce
        • June 2016-Commerce
        • Dec 2015-Commerce
        • June 2015-Commerce
    • Chartered Accountant
      • Level-1 – Foundation
        • Syllabus
        • CA Level-1 Blog
      • Level-2 – Intermediate
        • Syllabus
        • CA Level-2 Blog
      • Level-3 – Final
        • Syllabus
        • CA Level-3 Blog
    • B.Com / M.Com
    • 11 Commerce
    • 12 Commerce
  • Blog
    • Income Tax
    • Economics
    • Accounts
    • Financial Management
    • HRM- Human Resource Management
    • Audit
    • Organization Behaviour
    • Industrial Relation (IR)
    • NCERT
      • 10th Class
      • 11th Class
      • 12th Class
      • 9th Class
  • Contact
    • Have any question?
    • +91 7905338496
    • achievercommerce@gmail.com
    Login
    Commerce Achiever
    • Home
    • Subjects
      • UPSC Commerce Optional
        • Syllabus – UPSC Commerce Optional
        • UPSC Commerce and Accountancy Optional Question Paper
        • Book
          • UPSC Commerce Optional Books – The Marathon of UPSC Commerce Optional
        • Blog
        • Courses
        • Answer Writing Practise
        • News
      • UGC NET – Commerce Optional
        • UGC NET – Syllabus
        • Past Papers
          • July 2018-Commerce
          • Dec 2017-Commerce
          • June 2017-Commerce
          • Dec 2016-Commerce
          • June 2016-Commerce
          • Dec 2015-Commerce
          • June 2015-Commerce
      • Chartered Accountant
        • Level-1 – Foundation
          • Syllabus
          • CA Level-1 Blog
        • Level-2 – Intermediate
          • Syllabus
          • CA Level-2 Blog
        • Level-3 – Final
          • Syllabus
          • CA Level-3 Blog
      • B.Com / M.Com
      • 11 Commerce
      • 12 Commerce
    • Blog
      • Income Tax
      • Economics
      • Accounts
      • Financial Management
      • HRM- Human Resource Management
      • Audit
      • Organization Behaviour
      • Industrial Relation (IR)
      • NCERT
        • 10th Class
        • 11th Class
        • 12th Class
        • 9th Class
    • Contact

      Accounts

      • Home
      • Blog
      • Learn - Free
      • Blogs
      • Accounts

      Double Entry System-Meaning,Understanding,Types,Advantage and Disadvantage,Debits and Credits (Commerce Achiever)

      • Posted by commerce achiever1
      • Categories Accounts, Blogs, Learn - Free
      • Date May 28, 2021

      What Is Double Entry?

      Double entry, a fundamental concept underlying present-day bookkeeping and accounting, states that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the accounting equation:

      ​Assets=Liabilities+Equity​

      With a double entry system, credits are offset by debits in a general ledger or T-account.

      The Basics of Double Entry

      In the double-entry system, transactions are recorded in terms of debits and credits. Since a debit in one account offsets a credit in another, the sum of all debits must equal the sum of all credits. The double-entry system of bookkeeping standardizes the accounting process and improves the accuracy of prepared financial statements, allowing for improved detection of errors.

      Types of Accounts

      Bookkeeping and accounting are ways of measuring, recording, and communicating a firm’s financial information. A business transaction is an economic event that is recorded for accounting/bookkeeping purposes. In general terms, it is a business interaction between economic entities, such as customers and businesses or vendors and businesses.

      Under the systematic process of accounting, these interactions are generally classified into accounts. There are seven different types of accounts that all business transactions can be classified:

      • Assets
      • Liabilities
      • Equities
      • Revenue
      • Expenses
      • Gains
      • Losses

      Bookkeeping and accounting track changes in each account as a company continues operations.

      Debits and Credits

      Debits and Credits are essential to the double entry system. In accounting, a debit refers to an entry on the left side of an account ledger, and credit refers to an entry on the right side of an account ledger. To be in balance, the total of debits and credits for a transaction must be equal. Debits do not always equate to increases and credits do not always equate to decreases.

      A debit may increase one account while decreasing another. For example, a debit increases asset accounts but decreases liability and equity accounts, which supports the general accounting equation of Assets = Liabilities + Equity. On the income statement, debits increase the balances in expense and loss accounts, while credits decrease their balances. Debits decrease revenue and gains account balances, while credits increase their balances.

      The Double-Entry Accounting System

      Double-entry bookkeeping was developed in the mercantile period of Europe to help rationalize commercial transactions and make trade more efficient. It also helped merchants and bankers understand their costs and profits. Some thinkers have argued that double-entry accounting was a key calculative technology responsible for the birth of capitalism.

      The accounting equation forms the foundation of the double-entry accounting and is a concise representation of a concept that expands into the complex, expanded and multi-item display of the balance sheet. The balance sheet is based on the double-entry accounting system where total assets of a company are equal to the total of liabilities and shareholder equity.

      Essentially, the representation equates all uses of capital (assets) to all sources of capital (where debt capital leads to liabilities and equity capital leads to shareholders’ equity). For a company keeping accurate accounts, every single business transaction will be represented in at least of its two accounts.

      For instance, if a business takes a loan from a financial entity like a bank, the borrowed money will raise the company’s assets and the loan liability will also rise by an equivalent amount. If a business buys raw material by paying cash, it will lead to an increase in the inventory (asset) while reducing cash capital (another asset). Because there are two or more accounts affected by every transaction carried out by a company, the accounting system is referred to as double-entry accounting.

      This practice ensures that the accounting equation always remains balanced – that is, the left side value of the equation will always match with the right side value.

      KEY TAKEAWAYS

      • Double-entry refers to an accounting concept whereby assets = liabilities + owners’ equity.
      • In the double-entry system, transactions are recorded in terms of debits and credits.
      • Double-entry bookkeeping was developed in the mercantile period of Europe to help rationalize commercial transactions and make trade more efficient.
      • The emergence of double-entry has been linked to the birth of capitalism.

      Tag:CAfoundation, CAfoundationaAccounts, CAfoundationClasses, CAfoundationEconomic, CAfoundationFees, CAfoundationLaw, CAfoundationRegistration, commerce, commerceachiever, CommerceAndAccountancy, CommerceBaba, Debits and Credits, double-entry system

      • Share:
      commerce achiever1

      Previous post

      Benefits of Convergence of AS with IFRS (Commerce Achiever)
      May 28, 2021

      Next post

      Account-Meaning,Definition,5 Types of accounts (Commerce Achiever)
      May 28, 2021

      You may also like

      functions & uses of Cost Accountant
      A medium size firm is making large profits and they do not have a Cost Accounting Department. There is a proposal to employ a Cost Accountant. What would you consider to be his functions and how can he make himself useful to the management
      June 16, 2023
      _Blog Post
      What are the functions of Cost Accounting?
      June 16, 2023
      UPSC Commerce and Accountancy Optional
      Commerce and Accountancy Optional Success Rate – UPSC Commerce & Accountancy Optional
      May 25, 2023
      • +91 7905338496
      • achievercommerce@gmail.com

      Our Subjects

      • UPSC Commerce Optional
      • UGC NET – Commerce Optional
      • Chartered Accountant
      • B.Com / M.Com
      • 11 Commerce
      • 12 Commerce

      Useful Links

      • Learn – Free
      • Income Tax
      • Economics
      • Accounts
      • Financial Management
      • HRM- Human Resource Management
      • Audit
      • Organization Behaviour
      • Industrial Relation (IR)
      • NCERT

      Subscribe

      Don’t lose out on any important Post and Update. Learn everyday with Experts!!

      Copyright © 2024-2025 Commerce Achiever | All Rights Reserved

      toto slot
      situs toto
      situs toto
      situs toto
      situs toto login
      toto slot
      toto slot
      idn slot
      slot hoki

      • Privacy
      • Terms
      • Sitemap
      • Purchase
      situs toto situs toto cerutu4d cerutu4d cerutu4d cerutu4d bo toto pulsa bo togel bo togel bo togel bo togel cerutu4d bandar toto macau bo toto situs togel situs togel cerutu4d cerutu4d cerutu4d cabe4d situs toto slot gacor situs togel situs toto agen toto situs togel situs toto situs togel resmi slot gacor slot gacor slot gacor
      situs toto situs toto cerutu4d cerutu4d cerutu4d cerutu4d bo toto pulsa bo togel bo togel bo togel bo togel cerutu4d bandar toto macau bo toto situs togel situs togel cerutu4d cerutu4d cerutu4d

      Login with your site account

      Lost your password?

      Message Us