What is Double Entry System

This free online accounting training lecture on Double Entry System will help you to understand:

  • What is Double Entry System
  • History behind Double Entry System
  • Father of Double Entry System
  • Double Entry Bookkeeping

So dear accounting students, from our previous online accounting training lectures you have come to know that every transaction affects at least twice. It may be happen with both side of the accounting equation or any particular side. This is why we have to record all relevant data of each and every transaction in the accounting books like journal, ledger. This will show the changes made by each transaction. This system is called as Double Entry System in accounting world. It is worth mentioning that double entry system is also called as Double Entry Bookkeeping.

This double entry system was first introduced in 15th Century by Father Luca Pacioli (1445-1517). He first thought about the system and wrote on his world famous book, Summa de arithmetica, geomatria, proportioni et proportionalita.’ The core points of the system is that each transaction creates some accounts which need to be twice at least and must fall in two categories Debit and Credit. If you are not clear about the concept of Account then here is the explanation. An account means collection of all transactions on a particular subject. Sales, Purchase, Advertisement, Service Revenue, Capital-everything are accounts.

Let™s analysis a transaction. For example, Mr. Robert, a shopkeeper sales 2 books at $ 40 each. So here the transaction will be:

Cash Account -‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ Dr ‘ ‘ 80 ($ 40 x 2)
Sales Account -‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ Cr’ ‘ 80 ($ 40 x 2)

This is the real beauty of double entry system. From this system, we come to know that each transaction have to be divided into 2 categories under 2 or more accounts. In our next online accounting training class, we will discuss about the affects of different types of transactions .








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