What is Double Entry System? Definition with Examples of Bookkeeping System 4


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Double Entry System Definition:

In accounting, double entry system means every transaction requires corresponding opposite entry into another account. For example: Mr. David received Rs.5,000/- as income. In this scenario, two journal entries would look like this: debit Rs.5,000/- into cash a/c and credit Rs.5,000/- into income’s a/c. Debit and credit of journal entries are decided based on the golden rules of the accounting system. Accounting equation is used as an error detection tool for journal entries. This is accomplished by balancing accounting equation. Accounting equation formula is Equity = AssetsLiabilities.

There is no restriction on the accounts used for every transaction, yet the base of minimum two records is always present. Every account is divided into two segments, debit (left side) and credit (right side) of the account. In double entry system, total amount of debit and credit entries should always match. Account is said to be in-balance when debit and credit balances are tallied. In case of any mismatch, accounts are said to be out-of-balance account. Examples and format of double entry accounting system are as follows:


Double Entry System Example:

Here is the example of double entry bookkeeping system which shows you how to maintain double entry accounting system.

Bank Account

As On 31-03-20xx

A.Y 20xx-20xx

DateDebitAmount (Rs.)DateCreditAmount (Rs.)
09-07-15Abc Garments Ltd.30,000.0001-04-15Balance B/D10,000.00
12-08-15Cash10,000.0008-08-15Xyz Textiles Pvt. Ltd.50,000.00
04-09-15Bank Interest19,000.00
01-12-15Bank Interest16,000.00
31-03-16Balance C/F55,000.00
95,000.0095,000.00

Double Entry System Format:

If you beginner or new to accounting system then we will recommend you to follow the double entry bookkeeping system which is widely used across the world instead of single entry system. Here we show you sample format of double entry system. Below you can see the double entry accounting system format for cash account.

Cash Account

As On 31-03-20xx

A.Y 20xx-20xx

DateDebitAmount (Rs.)DateCreditAmount (Rs.)
09-06-15Cash Withdrawals50,000.0001-04-15Balance B/D75,000.00
12-08-15Cash Withdrawals25,000.0006-08-15Bank A/c15,000.00
12-09-15Bank A/c20,000.00
09-12-15Bank A/c15,000.00
31-03-16Balance C/F50,000.00
1,25,000.001,25,000.00

Wiki Finance pedia - e-learning course on Accounting Wikipedia Chapter - Double Entry System of Book-KeepingDebit Definition:

Debit is positioned at the left side of an account. It either increases expenses account or raise the valuation of assets or decreases valuation of equity account or reduces liabilities.


Credit Definition:

Credit is positioned at the right side of an account. It either increases liabilities or raise the assessment of equity account or decreases expenses account or depreciate assets.


An account for assets, liabilities, expenses, revenue, gains, equity are been maintained to prepare profit and loss statement and balance sheet of the company or an organisation. Let us take an example of some of the accounts.

AccountsAccount CategoryUsual Balance of the Account
Cash A/cAssets AccountDebit Balance
Inventory A/cAssets AccountDebit Balance
Accounts Receivable A/cAssets AccountDebit Balance
Fixed Assets A/cAssets AccountDebit Balance
Notes Payable A/cLiabilities AccountCredit Balance
Accounts Payable A/cLiabilities AccountCredit Balance
Accrued Liabilities A/cLiabilities AccountCredit Balance
Common Stock A/cEquity accountCredit Balance
Retained Earnings A/cEquity accountCredit Balance
Revenue – Services A/cRevenue accountCredit Balance
Revenue – Products A/cRevenue accountCredit Balance
Travel and Entertainment A/cExpense accountDebit Balance
Cost of Goods Sold A/cExpense accountDebit Balance
Wage Expense A/cExpense accountDebit Balance
Utilities A/cExpense accountDebit Balance
Loss on Sale of Asset A/cProfit / Loss AccountDebit Balance
Gain on Sale of Asset A/cProfit / Loss AccountCredit Balance

- Tutorial Course - Basics of Accounting for Beginners -

» e-Learning Chapter 1: What is Accounting and objectives of Accounting?

» e-Learning Chapter 2: What is Assets and Current Assets?

» e-Learning Chapter 3: What is Liability and Current Liabilities?

» e-Learning Chapter 4: What is Revenue and Expenses?

» e-Learning Chapter 5: What are the Types of Accounts?

» e-Learning Chapter 6: What is a Single Entry System?

» Currently Reading: What is Double Entry Accounting System?

» e-Learning Chapter 8: What are the steps involved in Accounting Process Cycle.

» e-Learning Chapter 9: What are Journal Entries? Format and Examples.

» e-Learning Chapter 10: What Is a General Ledger? Format with Example.

» e-Learning Chapter 11: What is a Trial Balance? Examples and Limitations.

» e-Learning Chapter 12: What is a profit and loss statement or Income Statement?

» e-Learning Chapter 13: What is a Balance Sheet? Definition, Format and Examples.

» e-Learning Chapter 14: What are the Different Types of Accounting Methods in Bookkeeping.

» e-Learning Chapter 15: Accounting Quiz – Basics of Accounting for Beginners Module.


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