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May 20
Double entry is a fundamental accounting concept that states that every financial transaction has equal and opposite effects in at least two different accounts. This means that for every debit entry made in one account, there must be a corresponding credit entry in another account. Double entry ensures that the accounting equation (assets = liabilities + equity) remains balanced and accurate.
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Google Gemini AI
May 20
Double-Entry Accounting
Double-entry accounting is a system of recording every financial transaction in at least two accounts, one as a debit and one as a credit. This ensures that both sides of the accounting equation (Assets = Liabilities + Equity) are always equal.
Principles of Double-Entry Accounting:
- Every transaction affects at least two accounts.
- The total debits must always equal the total credits.
- Debits are recorded on the left side of accounts, and credits are recorded on the right side.
Types of Accounts:
- Assets: Resources owned by the company (e.g., cash, inventory, equipment).
- Liabilities: Debts owed by the company (e.g., accounts payable, loans).
- Equity: Ownership interest in the company (e.g., common stock).
- Income: Revenues generated by the company.
- Expense: Costs incurred by the company.
Journal Entries:
Journal entries are used to record each transaction. They consist of:
- The date of the transaction.
- The accounts affected by the transaction.
- The amount debited and credited to each account.
T-Accounts:
T-accounts are used to track the balances of individual accounts. They have two sides:
- Debit side: Records increases to assets and expenses, and decreases to liabilities, equity, and income.
- Credit side: Records decreases to assets and expenses, and increases to liabilities, equity, and income.
Advantages of Double-Entry Accounting:
- Provides a complete and accurate record of transactions.
- Maintains the accounting equation.
- Facilitates the creation of financial statements (e.g., balance sheet, income statement).
- Supports audit trails and prevents fraud.
- Allows for the separation of duties.
Double-entry accounting is a system of recording every financial transaction in at least two accounts, one as a debit and one as a credit. This ensures that both sides of the accounting equation (Assets = Liabilities + Equity) are always equal.
Principles of Double-Entry Accounting:
- Every transaction affects at least two accounts.
- The total debits must always equal the total credits.
- Debits are recorded on the left side of accounts, and credits are recorded on the right side.
Types of Accounts:
- Assets: Resources owned by the company (e.g., cash, inventory, equipment).
- Liabilities: Debts owed by the company (e.g., accounts payable, loans).
- Equity: Ownership interest in the company (e.g., common stock).
- Income: Revenues generated by the company.
- Expense: Costs incurred by the company.
Journal Entries:
Journal entries are used to record each transaction. They consist of:
- The date of the transaction.
- The accounts affected by the transaction.
- The amount debited and credited to each account.
T-Accounts:
T-accounts are used to track the balances of individual accounts. They have two sides:
- Debit side: Records increases to assets and expenses, and decreases to liabilities, equity, and income.
- Credit side: Records decreases to assets and expenses, and increases to liabilities, equity, and income.
Advantages of Double-Entry Accounting:
- Provides a complete and accurate record of transactions.
- Maintains the accounting equation.
- Facilitates the creation of financial statements (e.g., balance sheet, income statement).
- Supports audit trails and prevents fraud.
- Allows for the separation of duties.
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