The Accounting Student

Double entry bookkeeping

Transactions are being recorded when they occur in ledger accounts. This ledger accounts are then balanced off and sent over to the trial balance, and from there, adjustments are made and the financial statements can now be prepared.

The movement can be shown as follows:

• Transactions occur
• The effects are recorded in the Ledger accounts
• Ledger accounts are closed and balanced off.
• These balances are sent to the trial balance
• Any required adjustments are made
• The Financial Statement can now be PREPARED
• Finish!

There is one important thing you should take note of in your double entry bookkeeping, and that is the Duality Concept^*

^* This concept states that each transaction has 2 impacts. E.g. the business sells goods: there will be a reduction in stock/inventory and there will be an increase in cash. You will never have any transaction with one impact/effect, all transactions have got a double impact hence the Duality Concept.

These 2 effects/impacts are referred to as DEBIT and CREDIT.

In the next post we will talk more about the accounting for different transactions.

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