The Rules of Double Entry Bookkeeping

Every financial transaction gives rise to two accounting entries:

  • one debit
  • one credit

The total value of debit entries in the nominal ledger should always be equal to the total value of credit entries.

  • An increase in an expense or an increase in an asset is a debit
  • An increase in income (eg a sale) or an increase in a liability (eg buying on credit) is a credit
  • A decrease in an asset (eg making a cash payment) is a credit
  • A decrease in a liability (eg paying a creditor) is a debit

The cash account:


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