I've just started a Bookkeeping Course - can someone please explain the Double Entry System to me in English!

Question

I understand that for every transaction there are two actions: Debit & Credit to be entered on an individual account.

What I can't get my head around is how do you work out which account is Debited and which one is Credited!

Does anyone have a SIMPLE way of helping me learn this?!

Many thanks!

Answer 1

Qoute:

Accounting entries are made on the left side and right hand sides of an account. When an amount is entered on the left side, the account is said to be debited, and when an amount is entered on the right side the account is said to be credited. The difference between the total debits and total credits is the balance of the account. The balance may be either a debit balance if the debit side exceeds the credit side; or a credit balance if the credit side exceeds the debit side. When the total debits equal the total credits, the account is said to have nil or zero balance. The words "debit" and "credit" should not be confused with "increase" or "decrease". Certain accounts may increase when debited and other accounts may increase when credited depending on the type of account involved.


Left hand side of the pageThis is the debit side

The right hand side of the page This is the credit side


The two rules of double-entry book keeping are that every transaction affects at least two accounts and that the total for the debit and credit sides should be equal. In other words, for every transaction, one or more accounts must be debited and one or more accounts must be credited.

The learners are required to master the following general rules:

Account An Increase A decrease

Asset Should be debited Should be credited
Liability Should be credited Should be debited
Capital Should be credited Should be debited

As for income account always the recording should be made to the credit side while all expenses account will always be debited.

end qoute

Answer 2

Every business transaction has at least two entries eg accounts payable(like the debt for a new office computer this entry is a credit entry balanced by a debit entry in office equipment(office computer) - at all times debit entries must balance credit entries. the advantage is that periodic summaries can be made of all transactions from which essential information of the state of the business can be calculated eg profitability, current debts and assets etc

Answer 3

Debits increase assets and decrease liabilities (and owners' equity).

Credits decrease assets and increase liabilities (and owners' equity).

Drill these two statements into your head.

Answer 4

I think fearslady has it except I would owner's equity after liailities in the second part.