What is Double Entry Accounting System? Definition

Table of Contents

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
As On 31-03-20xx			A.Y 20xx-20xx
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
As On 31-03-20xx			A.Y 20xx-20xx
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