Double Entry

The reason of this article is to help you understanding one of the accounting basics, i.e. double entry principle, which is applied for the purpose of recording business transactions in the books of the entity. Double entry accounting is a method in which each transaction is recorded in two part accounts, i.e. in one account as a debit and in the other account as a credit. In other words, in double entry principle each transaction that has a value added to the property account also has a value subtracted from the liabilities account – these transactions are called credits.  Conversely, each deal that has a value added to the liabilities account has a value subtracted from the assets account – these transactions are called debits.

Double entry accounting principle is used more often than the solo entry principle, in which each transaction is recorded in only one account.  It is used more often since it prevents many errors and promptly alerts the industry to possible errors so that they can be corrected on a timely basis. Since credits and debits will always be equal, i.e. according to the essence of accounting basics there must be an equation between debits and credits, if there is ever a discrepancy between the value of the credits and debits, it is an alert to the business that an error has occurred while recording the transaction in the books of the business.