Double-Entry, Debits and Credits | AccountingCoach

Note: Double-entry bookkeeping means that every transaction will involve a minimum of two accounts. Debits and Credits. The words debit and credit have been ... Bookkeeping(Explanation) PrintPDF Part1 IntroductiontoBookkeeping,Bookkeeping:PastandPresent Part2 AccrualMethod Part3 Double-Entry,DebitsandCredits Part4 GeneralLedgerAccounts Part5 DebitsandCreditsintheAccounts Part6 AssetAccounts Part7 LiabilityandStockholders'EquityAccounts Part8 IncomeStatementAccounts Part9 RecordingTransactions,BankReconciliation Part10 AdjustingEntries,ReversingEntries Part11 BalanceSheet,IncomeStatement,BalanceSheetandIncomeStatementareLinked Part12 CashFlowStatement Part13 StatementofStockholders'Equity,ClosingCut-Off,ImportanceofControls Double-Entry,DebitsandCredits Double-Entry Exceptforsomeverysmallcompanies,thestandardmethodforrecordingtransactionsisdouble-entry.Double-entrybookkeepingordouble-entryaccountingmeansthateverytransactionwillinvolveatleasttwoaccounts.Toillustrate,hereareafewtransactionsandthetwoaccountsthatwillbeaffected: Note:Double-entrybookkeepingmeansthateverytransactionwillinvolveaminimumoftwoaccounts. DebitsandCredits Thewordsdebitandcredithavebeenassociatedwithdouble-entrybookkeepingandaccountingformorethan500years.Herearethemeaningsofthosewords: debit:anentryontheleftsideofanaccount credit:anentryontherightsideofanaccount Thedebitandcreditruleindouble-entrybookkeepingcanbestatedseveralways: Foreachandeverytransaction,thetotalamountenteredontheleftsideofanaccount(oraccounts)mustbeequaltothetotalamountenteredontherightsideofanotheraccount(oraccounts). Foreachandeverytransaction,thetotalofthedebitamountsmustbeequaltothetotalofthecreditamounts. Debitsmustequalcredits. Inshort... Dependableaccountingsoftwarewillbewritten/codedtoenforcetheruleofdebitsequaltocredits.Inotherwords,atransactionwillbeacceptedandprocessedonlyiftheamountofthedebitsisequaltotheamountofthecredits. Theaccuracyofaccountingsoftwarewillalsoensurethattheaccountsandthetrialbalancewillalwaysbeinbalance.Hereisanexampleofapartialtrialbalance: Eventhoughtheaccountingsoftwarehaseliminatedtheclericalerrorsthatoccurredbecauseamountswerehandwrittenandtheaccountbalanceswerecalculatedmanually,someothererrorscanstilloccur.Herearesomeerrorsthatwillnotbedetectedbytheaccountingsoftware: Anentiretransaction(boththedebitamountandthecreditamount)wasomitted. Anentiretransactionwasenteredtwice. Anincorrectamountwasenteredbothasadebitandasacredit. Anincorrectaccountwasdebited. Anincorrectaccountwascredited. Evenwiththeaboveerrors,thetrialbalancewillremaininbalance.Thereasonisthatthetotalofthedebitbalanceswillstillbeequaltothetotalofthecreditbalances. T-Accounts Toassistinvisualizingtheeffectofrecordingadebitorcreditamountandtheresultingbalancesofgeneralledgeraccounts,itishelpfultodrawaT-account,asshownhere: DebitamountswillbeenteredontheleftsideoftheT-account,andcreditamountswillbeenteredontherightside.Thetitleoftheaccountwillappearatthetopofeach"T". Sinceeverytransactionwillinvolveatleasttwoaccounts,werecommendthatyoualwaysbeginbydrawingtwoT-accounts.Forexample,ifacompanypaysitsrentof$2,000forthecurrentmonth,thetransactioncouldbedepictedwiththefollowingT-accounts: NotethatoneT-account(RentExpense)hasadebitof2,000andthatoneT-account(Cash)hasacreditamountof2,000.Hence,thetransactionhaddebitsequaltocredits. 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AllTopics Bookkeeping Financial Managerial Suggested Alphabetical HowtoBegin(Video) 01.AccountingBasics 02.DebitsandCredits 03.ChartofAccounts 04.Bookkeeping 05.AccountingEquation 06.AccountingPrinciples 07.FinancialAccounting 08.AdjustingEntries 09.FinancialStatements 10.BalanceSheet 11.WorkingCapitalandLiquidity 12.IncomeStatement 13.CashFlowStatement 14.FinancialRatios 15.BankReconciliation 16.AccountsReceivableandBadDebtsExpense 17.AccountsPayable 18.InventoryandCostofGoodsSold 19.Depreciation 20.PayrollAccounting 21.BondsPayable 22.Stockholders'Equity 23.PresentValueofaSingleAmount 24.PresentValueofanOrdinaryAnnuity 25.FutureValueofaSingleAmount 26.NonprofitAccounting 27.Break-evenPoint 28.ImprovingProfits 29.EvaluatingBusinessInvestments 30.ManufacturingOverhead 31.NonmanufacturingOverhead 32.ActivityBasedCosting 33.StandardCosting AccountingCareers CertificatesofAchievement TaketheTour Join525,295subscribers Youarealreadysubscribed.Thisofferisnotavailabletoexistingsubscribers. 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