ACCA/CAT

Session 3 Double entry bookkeeping

☆The duality concept and double entry bookkeeping

Duality concept: each and every transaction has a double effect on the business and the accounting equations.(A= C + L)

Rules of double entry bookkeeping:

● Each time a transaction is recorded, both effects must be taken into account.

● These two effects are equal and opposite such that the accounting equation will always prove correct.

Assets – Liabilities = Capital

● Traditionally, one effect is referred to as the debit side ( Dr.) and the other as the credit side of the entry (Cr.)

☆Ledger accounts, debits and credits

Ledger account:

● transactions are recorded in the relevant ledger accounts. There is a ledger

account for each asset, liability, revenue and expenses’ item, and for the owner’s capital.

● Each account has two sides: the debit and credit sides.

● The duality concept means that each transaction will affect two ledger accounts

● One account will be debited and the other credited

● Whether an entry is to debit or credit side of an account depend on the types of account and the transaction.

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