Back to: BUSINESS STUDIES JSS1
Welcome to class!
In today’s class, we will be talking about double-entry bookkeeping. Enjoy the class!
Double Entry Bookkeeping
Double-entry bookkeeping means that every debit entry must have a corresponding credit entry. This is a principle or rule that is followed globally in the bookkeeping system.
Every financial transaction has two aspects of it. These are the giving and the receiving parts. So the double-entry system stipulates that to make a complete recording, the bookkeeper should:
- Debit the receiver
- Credit the giver
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
- All expenses and losses are to be debited.
- All receipts and profit are to be credited
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. Thus, if a value is given, it is also received. The meaning of this is that where there is a giver, there is also a receiver who is called a debtor. The first Golden Rule of bookkeeping, therefore, states that you debit the receiver and credit the giver.
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. Every credit entry must have a corresponding debit entry, and every debit must have a corresponding credit entry.
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