The accounting industry has grown somewhat and it contains some technical words but somehow these words largely ignored by people. Sometimes some big and developed sectors like banking industry do not aware of this words and “Double Entry Bookkeeping” is one of them. Even some bookkeeping and accounting experts are also not aware of this particular method of bookkeeping.
Double entry bookkeeping is a simple method by which every transaction is recorded by entries to two or more accounts and according to this method the total of the debit side (Dr) is equal to the total of the credit side (Cr). Generally, the account which usually attracts a debit and which usually attract a credit is sometimes confusing.
The simple way to understand double entry bookkeeping is to understand that every financial transaction has a double effect. Usually medium and larger businesses use a double entry system for recording business transactions. Thus, double entry accounting develops from the fact that every transaction has double effects.
The difference between bookkeeping services and accounting may be unclear to the unskilled people while both of them have similar importance to financial success. Bookkeeping is an important part of the accounting function and it is necessary for any business organizations to record the financial transactions.
Basically, double entry bookkeeping works on the principle that assets are the summary of liability and equity. For the accounts to remain in balance, a change in one account must match with a change in another account. These changes are known as debits and credits. Debit and credit are interconnected; when an account is debited another account in relation is credited. Assets and accounts receivable are counted as debits, while liabilities and accounts payable are treated as credits.
The function of a bookkeeper is to record the primary documents such as sales invoices and purchase invoices into the financial ledgers. Cash and bank records must also be entered.
Basic points for double entry bookkeeping:
o A debit or credit will either increase or decrease the account balance…depending on the type of account you are working with.
o For every increase in one account, there is an equal decrease in another account.