Double-entry book keeping

The method at one of methods of the record (bookkeeping) in modern accounts, always debit (the left) and of recording one one of transaction (increase and decrease of property debt capital profit cost), from two sides, creditor (the right), it calculates & rearranging. It has become method of general accounting entry presently, regarding the usual enterprise above fixed scale.

When the basis of transaction is, "exchange" loses some property of labor assistant there are 2 surface characteristics that simultaneously, you obtain what anew. For example, the commodity is bought (it stocked) when, the cash decreases, the property which has future production sale value increases. When deposits and, cash property decreasing, deposits and savings property increases. It keeps recording double-entry bookkeeping, with the type which offsets profit and loss both parties which such simultaneously occur.

When with double-entry bookkeeping transaction occurs, classification is done first. Classification, it belongs to which title of account, it classifies transaction, it calls that you divide into the subject of debit and the creditor, in the journal (account book which records classification of transaction to occurrence order) it keeps entering.
Date Debit Amount Creditor Amount
6/7 Expense account spending 50,000 Cash 50,000
6/11 Cash 800,000 Sale 800,000
6/22 Communication expense 12,000 Cash 12,000
6/29 Ordinary deposit & saving 100,000 Cash 100,000
Entry example of journal

In this case, the total amount of debit (the left) and the creditor (the right) always agrees. You call this "loan average principle", have become merit of double-entry bookkeeping.

Classification is done it is set every enterprise by "title of account", but this to five elements of property debt capital profit cost it can classify & can total.
Property
Cash and account receivable, securities, note receivable, commodity, building, land and fixture etc.
Cost
Stock and salaries and wages, communication expense, fuel and light expenses, consumable expense, ad expenses and expense account spending, interest and cost accounting etc.

Debt
Loan, debt, notes and accrued amount payable etc.
Capital
Net worth and the like
Profit
Sale and dividends received, receipt interest and miscellaneous receipt etc.

• The classification which is recorded to the journal is posted to the ledger (general ledger). The general ledger is the account book in order change every of title of account it records & to total. Because posting is monotonous work, if the accounting software and the like is utilized, it is done automatically.
• Debit Amount Creditor Amount
• Sale 800,000 Expense account spending 50,000
• Communication expense 12,000
• Ordinary deposit & saving 100,000
• Entry example of general ledger (cash)

With enterprise accounts, on the basis of these records, in every fixed period (settling day and the like)financial affairs statementsin "balance sheet" "Profit and Loss Statement " and so on are drawn up. As for the balance sheet, property = capital + debt (balance sheet equality), as for the Profit and Loss Statement, it has been based on the relationship of the cost + profit = profit (Profit and Loss Statement equality).

In addition, when it balances accounts every fixed period inprerequisite (going concern), the profit and cost of this term appropriating the fact that continuously business is done in this term is required. Bookkeeping becomes necessary even in order to work the.

As for purpose of double-entry bookkeeping, the manager and the stake holder are to analyzing & to grasp results of operations and financial situation of enterprise via these financial affairs statements. As for description rule of double-entry bookkeeping being universal as a general rule, also "common language of business" is said.