Double Entry Book-Keeping System

According to Duality Concept, each transaction has dual effect on the accounting equation. This forms the basis for DE system of
recording which makes use of ledgers or T accounts where every transaction has equal entries on the debit side (left side) and
credit side (right side).
Rules for recording in Accounts:
-Debit: an entry in the left hand column of an account to record a debt; debits increase asset and expense accounts and decrease
liability, income, and equity accounts
-Credit: an entry in the right hand column of an account; credits increase liability, income, and equity accounts and decrease asset
and expense accounts
ASSETS + EXPENSES (Debit) = CAPITAL + REVENUE + LIABILITIES (Credit)







Double Entry Rules for recording entries:
(a) Every transaction affects at least two accounts (may affect more than 2).
(b) There must be at least one debit and one credit entry.
(c) The total debt must be equal to the total credit.
(d) Particulars in the account refer to the name of the other account which the transaction is recorded. (eg Cash and
Capital accounts)
Example of Accounts and their Normal Balances:
Note that the accounts in orange have opposite normal balances. For example, if you remember that the Capitals
normal balance is credit, Drawings normal balance must be debit. Thus, it helps to remember the normal balances of
some major accounts.
Debit (normal balance) Credit (normal balance)
Motor Vehicles Loan

Debtors

Creditors
Cash/ Bank (Cheque) Bank (Overdraft)

Stock


Drawings

Capital
Sales Returns

Purchases Returns
Discount allowed

Discount received
Rent expenses

Rent received
Purchases

Sales
Salaries, Wages, Insurance, etc.



Steps for Recording Transactions in T Accounts:
Using the illustration of an owner starting a business with cash.
i. Determine the names
of the account

Cash account (From the word cash) Capital account (From the word
owner starting)
ii. Identify the type of
accounts

Asset account Capital account
iii. Identify the effects on
the accounts apply
rules of double entry

Cash (Asset) increase
Record in Debit
Capital increase
Record in Credit