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 = Assets – Liabilities.
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 |
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As On 31-03-20xx |
A.Y 20xx-20xx |
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Date | Debit | Amount (Rs.) | Date | Credit | Amount (Rs.) |
09-07-15 | Abc Garments Ltd. | 30,000.00 | 01-04-15 | Balance B/D | 10,000.00 |
12-08-15 | Cash | 10,000.00 | 08-08-15 | Xyz Textiles Pvt. Ltd. | 50,000.00 |
04-09-15 | Bank Interest | 19,000.00 | |||
01-12-15 | Bank Interest | 16,000.00 | |||
31-03-16 | Balance C/F | 55,000.00 | |||
95,000.00 | 95,000.00 |
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 |
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As On 31-03-20xx |
A.Y 20xx-20xx |
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Date | Debit | Amount (Rs.) | Date | Credit | Amount (Rs.) |
09-06-15 | Cash Withdrawals | 50,000.00 | 01-04-15 | Balance B/D | 75,000.00 |
12-08-15 | Cash Withdrawals | 25,000.00 | 06-08-15 | Bank A/c | 15,000.00 |
12-09-15 | Bank A/c | 20,000.00 | |||
09-12-15 | Bank A/c | 15,000.00 | |||
31-03-16 | Balance C/F | 50,000.00 | |||
1,25,000.00 | 1,25,000.00 |
Debit 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.
Accounts | Account Category | Usual Balance of the Account |
Cash A/c | Assets Account | Debit Balance |
Inventory A/c | Assets Account | Debit Balance |
Accounts Receivable A/c | Assets Account | Debit Balance |
Fixed Assets A/c | Assets Account | Debit Balance |
Notes Payable A/c | Liabilities Account | Credit Balance |
Accounts Payable A/c | Liabilities Account | Credit Balance |
Accrued Liabilities A/c | Liabilities Account | Credit Balance |
Common Stock A/c | Equity account | Credit Balance |
Retained Earnings A/c | Equity account | Credit Balance |
Revenue – Services A/c | Revenue account | Credit Balance |
Revenue – Products A/c | Revenue account | Credit Balance |
Travel and Entertainment A/c | Expense account | Debit Balance |
Cost of Goods Sold A/c | Expense account | Debit Balance |
Wage Expense A/c | Expense account | Debit Balance |
Utilities A/c | Expense account | Debit Balance |
Loss on Sale of Asset A/c | Profit / Loss Account | Debit Balance |
Gain on Sale of Asset A/c | Profit / Loss Account | Credit Balance |
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Basics of Accounting for Beginners
- Chapter 1: What is Accounting with Examples
- Chapter 2: Objectives of Accounting
- Chapter 3: Types of Accounts
- Chapter 4: Branches of Accounting
- Chapter 5: Accounting Process
- Chapter 6: What is Assets and Current Assets?
- Chapter 7: What is Liability and Current Liabilities?
- Chapter 8: What is Revenue and Expenses?
- Chapter 9: What is a Single Entry System?
- Currently Reading: What is Double Entry System?
- Chapter 11: What are Journal Entries? Format and Examples
- Chapter 12: What Is a General Ledger? Format with Example
- Chapter 13: What is a Trial Balance? Examples and Limitations
- Chapter 14: What is a Profit and Loss Statement or Income Statement?
- Chapter 15: What is a Balance Sheet? Definition, Format and Examples
- Chapter 16: What is Managerial Accounting? Role, Job and Objectives
- Chapter 17: Accounting Quiz – Basics of Accounting for Beginners Module