![]() Should you have any further question, feel free to ask in the comment section below and trust us to respond as soon as possible. In our next class, we will be talking about Introduction to Keyboarding. Double entry is a bookkeeping system in which all transactions are entered in two places, as a debit in one account and as a credit in another. Every credit entry must have a corresponding debit entry, and every debit must have a corresponding credit entry. In the process of debiting the account, receiving the value and crediting the account surrendering the value, you end up recording every transaction twice, once as a debit entry and again as a credit entry. The first Golden Rule of bookkeeping, therefore, states that you debit the receiver and credit the giver. The meaning of this is that where there is a giver, there is also a receiver who is called a debtor. Thus, if a value is given, it is also received. The fundamental concept of accounting is that every business transaction in money or money-worth has two effects: the receipts of a benefit by one account and the giving of alike benefit by another account. All receipts and profit are to be credited.All expenses and losses are to be debited.There are a range of useful accounting skills to learn through AAT.Therefore, the double-entry principle state that for every debit entry, there must be a corresponding credit entry or for every credit entry there must be a corresponding debit entry, vice versa This was a vast improvement from the abacus and early single-entry systems used from the age of Antiquity.Īs Double entry bookkeeping became more widely used, it extended to include detailed descriptions of products, income, expenses, loans, bad debt, and more. ![]() So where did it come from? History suggests that Double entry bookkeeping was first used by merchants in the Middle Ages. External users, like investors, depend on financial statements to view a company’s creditworthiness. Management depend on financial statements to see how the companies performing financially and to create budgets. It’s important for companies to produce accurate financial statements quickly and efficiently. For example, if your cash balance seems too high on your balance sheet, you can trace back the transactions made to the cash account and see if they’re accurate.įinancial statements are easy to prepare in companies that use Double entry bookkeeping because info is gathered directly from the Double entry bookkeeping transactions. Audit trails allow you to trace transactions that were posted to the general ledger. Although errors are greatly reduced, it does not entirely prevent error.ĭouble entry bookkeeping reduces fraud by leaving an adult trail. Errors are easily caught with Double entry bookkeeping because the debit and credit amounts are equal. But Double entry bookkeeping reduces the chance of that as it provides checks and balances. Human error can distort a company’s financial position. Recording both means you’re accurately calculating profit and loss. The matching principle makes sure that expenses relate to revenue. ![]() One reason that Double entry bookkeeping is so accurate is that it implements the “matching principle”. When delving into the subject you’ll be made aware of concepts such as: account types, debits and credits, using day books, ledgers, account reconciliation, bank reconciliation, suspense accounts, using journals to correct errors and trial balances.Īll the above is important when progressing on to the later levels such as Advanced or Professional Level (Level 4), and for working in accounts.īenefits of Double entry bookkeeping Accuracy If you start at Foundation Certificate (Level 2), you’ll be eased nicely into the topic, whereas Advanced Level (Level 3) offers more detailed look. Once you master this skill you can produce accurate financial accounts for your management. Companies massively benefit from using Double entry bookkeeping because, not only reducing errors, it helps with financial reporting and prevents fraud.īookkeeping teaches you how to accurately record transactions into a manual Double entry system. The “Double entry” has two equal sides – a “debit” and a “credit”įor instance, recording a sale of £1 requires two entries: a “cash” debit of £1 to an account, and a “revenue” credit of £1.ĭouble entry accounting reduces errors and boosts the chance of your books balancing. It’s a type of bookkeeping where every post to an account requires an opposite post to a different account. ![]() Double entry bookkeeping is an accounting technique that records a debit and credit – for all company transactions.
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