The essence of double entry principle of balance. Double entry accounting as a method in which each transaction is recorded in two separate accounts. Double entry bookkeeping. Assets are tangible and intangible items of value. Interpreting balance sheet.
Theme: Double Entry Types of Balance Sheet Prepared: Almaty 2009y. Plan The Essence of Double Entry Principle The Accounting Equation Double Entry Bookkeeping Ledger Accounts Balance Sheet Trial Balance Interpreting Balance Sheet Glossary The Essence of Double Entry Principle In accounting, the journal should has two ledger that is called double entry accounting. This method was introduce by Mediecci in 12th century at Italy. The father of accounting, Luca Paccioli is the first publisher of double entry accounting system. Double entry accounting is a method in which each transaction is recorded in two separate accounts, i.e. in one account as a debit and in the other account as a credit. In other words, in double entry principle each transaction that has a value added to the assets account also has a value subtracted from the liabilities account - these transactions are called credits. Conversely, each transaction that has a value added to the liabilities account has a value subtracted from the assets account - these transactions are called debits. Double entry accounting principle is used more often than the single entry principle, in which each transaction is recorded in only one account. It is used more often since it prevents many errors and promptly alerts the business to possible errors so that they can be corrected on a timely basis. Since credits and debits should always be equal, i.e. according to the essence of accounting basics there must be an equation between debits and credits, if there is ever a discrepancy between the value of the credits and debits, it is an alert to the business that an error has occurred while recording the transaction in the books of the business. Thus, with the double entry accounting principle it is quick and easy to ensure that the accounts are always balanced. Also this principle is useful to record transactions separately and present proper and accurate data to its users for the purpose of decision making relating the entity. Example 1 Consider the following example of the double entry principle. Cut to the Chase, a hair salon, buys hair brushes in bulk once every quarter, purchase is made on credit, i.e. cash for the purchase made is paid later on after the purchase. The bulk of brushes costs $250. So, every quarter the accountant for Cut to the Chase makes $250 entry in the liabilities account (adding to the value of the liabilities) and a $250 entry in the assets account (adding to the value of the assets).
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