Using the Double-Entry System of Accounting

Double entry system of accounting or bookkeeping basically means that every business transaction will involve two or more accounts. This is one of the standard systems used by most small business or even large business nowadays. The main idea of using this system is to always keep a balance so that it can adhere to the accounting equation, “Liabilities + Owner’s Equity = Assets.

The theory of double-entry accounting system can be applied to, purchasing a piece of equipment with cash that would show a debit for the equipment and a credit for the cash, which results in a decrease in assets, receiving interest from depositing money into a business bank, issuing ordinary shares in your business for cash, receiving bank loan principal from a loan, and paying electricity bill.

To set this up on QuickBooks, the chart of accounts is used as a point of reference each time you would choose two or more accounts to enter a transaction into the general ledger. You can add more accounts to the chart of accounts and others may also be deleted if you think they are no longer needed.

As a common practice once you enter the account and amount that must be debited, it is usually on the first line, followed by the credited amount which is usually shown as indented to make it distinguishable. This two entries are called general journal entry.

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