Double Entry Accountign System

The Double-Entry Accounting System is one of the most widely used system in the accounting field, and have been around for hundred of years. It is said that this system is good for a business that has many transaction to record. In this method transactions are recorded twice, either in a credit or debit to one or more accounts, and in this way the balance should equal the sum of all accounts the debit should equal the credit, and the credit should equal the debit, this way there can be no errors. One of the most widely used forms in business is the T form, which is similar to the letter T, and it has one side for credit and one side for debit, and helps you to keep a balance of transaction, and money coming in and going out in other word a account balance sheet. Usually it is for claims, liabilities, assets, equity, and stockholder equity.

There are several double entry account types and they are, asset accounts, which cover things that are owned by the business like cash, supplies, and equipment, but can be related to personal ownership also like your car, or house. Liability accounts, is just the opposite it is notes & accounts payable, what you owe like the mortgage to the company, or like your car note or credit card bills, income accounts the money you owe, and service revenues, and expense accounts the money that is spent by the company or yourself, wages, rent, and depreciation expenses. Basically it is to show increases and decreases in the accounting record.

The double entry help you to keep the record straight, and to find mistakes this is the purpose of double entry if there is a mistake on one side then there is a mistake in the records account, because debits and credits entered on both side they should still come out to be the same sum of the account balance, so this is a very efficient way of record keeping, and why it is widely used by businesses. An example has been listed below.

Direct Delivery, Inc.Balance SheetDecember 1, 2011

Assets Liabilities & Stockholders' Equity

Cash $ 20,000 Liabilities

Stockholders' Equity

Common Stock $ 20,000

Total Assets $ 20,000 Total Liab. & Stockholders' Equity $ 20,000

As you see above both sides are equal to the other side, so you know that there is no mistake, this is a very good system to help you know that the calculations are correct. You can also use other accounts with in this ledger, depending on the things that your company needs to keep a record like receipts, etc. As you see above there are assets, cash stockholder, and liabilities and they all equal whether a debit r credit.