Golden Rules of Accounting - Double Entry System in Accounting
Double Entry System in Accounting The double-entry system of book-keeping is an accounting system that recognizes the fact that every transaction has two aspects – the receiving aspect and the giving aspect , and both these aspects are recorded in the books of accounts. Or we can say, in order to receive some value, an equal value needs to be given. Let us understand this with an example : Suppose, you are a shop owner and you are buying furniture for your shop by paying Rs 20,000 in cash. There are two aspects involved in this transaction: You are receiving furniture which can be termed as receiving aspect. The second one, you are paying cash which can be termed as giving aspect. According to the double-entry book-keeping system, every transaction will have at least two accounts that are impacted. A debit entry is done in one account and a credit entry is done in another account. In the above example, furniture is one account that is debited by Rs 20000 and cash is the other account