process accounting data using the double entry system

2.1 The Double Entry System of Book‑Keeping

Objective

Process accounting data using the double entry system.

What is a Double Entry?

💡 Every transaction affects at least two accounts – one is debited and one is credited. The total debits always equal the total credits: $Debit = Credit$.

Debits and Credits

• 🔄 Debit increases assets or expenses, and decreases liabilities, equity or revenue.
• 🔄 Credit increases liabilities, equity or revenue, and decreases assets or expenses.

The Accounting Equation

⚖️ Assets = Liabilities + Equity. The double entry system keeps this equation balanced.

Recording a Transaction – Step by Step

1. 📚 Identify the accounts involved.
2. 🔢 Decide which account is debited and which is credited.
3. 💰 Enter the amount in the correct column.
4. 🧾 Write a brief description.
5. ?? Check that total debits equal total credits.

Example Journal Entry

Trial Balance

🧾 After posting all journal entries, list all account balances. The sum of debits should equal the sum of credits. If they don't match, there's an error to find.

Common Mistakes to Avoid

• 🔍 Forgetting to balance debits and credits.
• ❌ Entering the wrong amount in the wrong column.
• 📉 Not recording a transaction at all.
• 🕵️‍♂️ Using the wrong account title.

Quick Quiz

If a company buys equipment for $2,000 cash, which accounts are affected and how are they recorded?