The Double Entry system of accounting or bookkeeping is an accounting system of systematically recording both effects in any business transaction
The Double Entry system of accounting or bookkeeping is an accounting system of systematically recording both effects in any business transaction. Every business transaction has two effects in the accounting equation. Every business transaction will involve two or more accounts.
There are always two equal sides in the double entry system, which is debit and credit. Debit side is always at the left side and Credit side is always at the right side. In the Double Entry system, it has debit items on debit side and credit items on credit side. Debit items represent the resources that needed in undertaking the business activities, which are Assets and Expenses, including Losses (i.e. expenses exceeding Revenue). Therefore, Credit items represent the sources provide or supply for the debit items, Credit items are Liabilities, Revenue and Equity. In order to be in balance, the sum of debits and credits for a transaction must be totally equal. Debits are not always represent increases and credits are not always represent decreases. A debit may increase one account while decreasing another. For example, a debit increases asset accounts but decreases liability and equity accounts, which supports the common accounting equation which is Assets equal to Liabilities plus Equity (Assets = Liabilities + Equity). Refer to the appendix 3.1, where there is an increase to debit items, it will recorded as a debit entry; where there is a decrease to debit items, it will recorded as a credit entry. Thus, it is definitely same in the changes to credit items. Where there is an increase to credit items, it will recorded as a credit entry; where there is a decrease to credit items, it will recorded as a debit entry. When an accounting transaction is created, there are always impact at least two accounts, with a debit entry being recorded against one account therefore a credit entry will recorded against the other account.