outline the double entry system of book-keeping

What is Double Entry?

📚 Double entry means that every transaction affects at least two accounts – one is debited and one is credited. Think of it like a seesaw: when one side goes down (debit), the other side must go up (credit) so the scale stays balanced. The basic rule is: Debit = Credit.

How It Works – The Debit & Credit Rule

1. Identify the accounts involved (e.g., Cash, Inventory, Accounts Payable).
2. Decide which account receives value (debit) and which account loses value (credit).
3. Record the amount in the journal with a debit on the left and a credit on the right.
4. Post the amounts to the respective ledger accounts.
5. Check that the total debits equal the total credits – the books are balanced.

Example: Buying Goods on Credit

?? Result: Inventory increases (debit) and Accounts Payable increases (credit). The books stay balanced because $5,000 = $5,000.

Exam Tips for 2.1

• Always write both debit and credit entries – missing one will make the answer incorrect.
• Use the account titles exactly as given in the question.
• Check that the total debits equal the total credits; if not, double‑check your entries.
• Remember the balance sheet equation: Assets = Liabilities + Equity – this helps decide which side to debit or credit.
• Practice converting narrative transactions into journal entries; the more you practice, the faster you’ll spot the correct debits and credits.

Quick Check – Balance Test

After recording all entries, add up the debit column and the credit column. If they match, your books are balanced. If they don’t, look for a missing entry or a mis‑typed amount.
🧮 Formula: ∑ Debit = ∑ Credit