The concept of Double Entry in Bookkeeping

Double entry bookkeeping is much superior to single entry bookkeeping and all significant businesses keep their accounting records in this way. At the heart of double entry bookkeeping is the concept that every transaction involves both the giving of a benefit and the receiving of a benefit.
Consequently, every transaction is written into the books twice, once as a debit and once as a credit. It follows that the bookkeeping system must always balance, which is a big advantage. Some types of mistake will cause the system to be out of balance, and as a result the bookkeeper will be alerted to a problem.
Double entry should not be taken to simply that two transactions are entered. It means that an inherent feature of a single transaction is that it is entered into two different accounts, in one as a debit and in one as a credit.
Consider as an example a cheque for £5,000 to insure the company cars. £5,000 is entered in the Insurance Account as a debit.
This account will eventually be a charge in the profit and loss account. At the same time £5,000 will be credited to the Bank Account. This reduces the balance of money in the bank or increases the overdraft. The balance of the bank account will eventually appear in the balance sheet. Debits and credits are explained in the next section of this chapter.

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