Double Entry System in Accounting

Scientific, systematic, complete, accuracy, profit or loss, financial position, control, decision making

Increase: liability, revenue, capital; Decrease: asset, expense

Asset and expense accounts with debit balances

<p>Communicates financial information necessary for decision making purposes</p> Signup and view all the answers

<p>Revenue (income, gains) accounts and liability accounts</p> Signup and view all the answers

<p>The double entry system of accounting means that every business transaction will involve two accounts or more.</p> Signup and view all the answers

<p>Double entry system ensures that the accounting equation (assets = liabilities + owner’s equity) always remains in balance because every transaction involves at least two accounts, and the total debits must equal the total credits.</p> Signup and view all the answers

<p>Debits increase balances in asset accounts and expense accounts, and decrease balances in liability accounts, revenue accounts, and capital accounts. Credits have the opposite effect.</p> Signup and view all the answers

<p>For example, when a company borrows money from its bank, the company’s Cash account will increase (debit) and its liability account Loans Payable will increase (credit).</p> Signup and view all the answers

<p>The double entry system helps in error detection because the total debits must equal the total credits for each transaction, making it easier to identify discrepancies.</p> Signup and view all the answers