Double-Entry System and Journal Entries
- Topic
- Double-Entry System and Journal Entries
- Area
- Bookkeeping & Journal
- Explanation
Double-Entry System
Every transaction has two effects: a debit and a credit of equal amounts.
Accounting Equation
$$Assets = Liabilities + Owner's \text{ Equity}$$
Rules of Debit and Credit
Account Type Debit Credit Assets Increase Decrease Liabilities Decrease Increase Equity Decrease Increase Revenue Decrease Increase Expenses Increase Decrease Journal Entry Format
Date Account Debit Credit Account Dr. XXX Account Cr. XXX Example: Cash Sales of NPR 10,000
- Dr. Cash 10,000
- Cr. Sales Revenue 10,000
Example: Purchase goods on credit NPR 5,000
- Dr. Purchases 5,000
- Cr. Accounts Payable 5,000