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I CAN ACCOUNTING IN ANY PROJECT-
Accounting is based on the idea of an easy and be obvious which is that any financial transaction consists of two parties, and takes account given account.
Which takes account is owed and which gives account called a creditor.
This is something logical if you, for example, borrowed $100 from your colleague you become indebted to your colleague this amount ($100) and your colleague is a creditor any prompts that amount.
Which take account called (debtor), who gave the account called (creditor)
Meaning of double-entry:
Is proving to commercial operation have two extremes: one debtor, the creditor and the other ......
The debtor is the end of the enriched (increase) is discharged by taking
And the creditor is the party of lacking (decrease) is discharged by giving
Van was a constraint: h / Bank to h / Client
Does it mean that the edema (balance) the bank has enriched (increased) by what the client paid
At the same time lacked (decreased) edema client - any money - as much as it paid by the bank
A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts.
The name derives from the fact that financial information used to be recorded using pen and ink in paper books or "ledgers" and that each transaction was entered twice (hence "double-entry"), with one side of the transaction being called a debit and the other a credit.
It was first codified in the15th century by the Franciscan friar Luca Pacioli. In deciding which account has to be debited and which account has to be credited, the golden rules of accounting are used. This is also accomplished using the accounting equation: Equity = Assets − Liabilities. The accounting equation serves as an error detection tool. If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. It follows that the sum of debits and the sum of the credits must be equal in value.
Double-entry bookkeeping is not a guarantee that no errors have been made – for example, the wrong ledger account may have been debited or credited, or the entries completely reversed.
== The double entry system of accounting or bookkeeping is a system utilized in which any recorded transaction will affect a minimum of two accounts, i.e., every business transaction will involve two accounts (or more). For example, when a company borrows money from its bank, the company’s Cash account will increase and its liability account Loans Payable will increase.
== Some of those accounts will be increased or decreased by a "debit," while other accounts will increase or decrease by a "credit." In any transaction, the total amount debited has to equal the amount credited. If a company pays $200 for an advertisement, its Cash account will decrease and its account Advertising Expense will increase.
== Double entry also allows for the accounting equation (assets = liabilities + owner’s equity) to always be in balance. In our example involving Advertising Expense, the accounting equation remained in balance because expenses cause owner’s equity to decrease. In that example, the asset Cash decreased and the owner’s capital account within owner’s equity also decreased.
== A third aspect of double entry is that the amounts entered into the general ledger accounts as debits must be equal to the amounts entered as credits.
== In general, Double Entry is an accounting technique which records each transaction as both a credit and a debit.
- Credit entries represent the sources of financing, and the debit entries represent the uses of that financing.
- Since each credit has one or more corresponding debits (and vice versa), the system of double entry bookkeeping always leads to a set of balanced ledger credit and debit accounts.
- Selected entries from these ledger balances are then used to prepare the income statement.
- This system makes it easier to detect potential errors (e.g., if debits do not equal credits, an error was made). If total debits do not equal total credits, there must be a mistake. However, this system cannot ensure complete accuracy. For example, even if debit balances equal credit ones, an error may still be present because a wrong account was debited (or credited) when the entry was made.
- Debits and credits can affect accounts. Increases and decreases are recorded differently for asset (Assets = Claims (Liabilities and Owner's Equity) and claim accounts. Here is what we mean:
a. Debit entries increase asset accounts, and decrease liability and equity accounts.
b. Credit entries increase liability and equity accounts, and decrease asset accounts.
The Essential Point of the Double-Entry System of Accounting for Every Transaction are:
a-- Transaction and Accounts
- A business transaction can be anything involving an income statement account and a balance sheet account, or solely balance sheet accounts. To use the double-entry system of accounting, companies must first determine the transaction and identify the related accounts.
- Companies may carry out transactions that are revenue or expense related, and transactions that associate with assets, liabilities or equity.
- Thus, companies also group transaction accounts into accounts for revenues and gains, expenses and losses, assets, liabilities and equity.
- Transaction impacts on the financial statements will be shown in a horizontal statements model. All events are numbered and their numbers are used as recording references. Recall that there are four types of accounting events:
n Asset source transactions
n Asset use transactions
n Asset exchange transactions
n Claims exchange transactions
- The transaction type will be indicated for each accounting event. All transactions took place during20X6. Due to the space limitations, we will not show all accounts while explaining a transaction. Only those accounts that are affected by a particular transaction will be shown in the accounting equation.
- In the cash flow section of the horizontal model, OA, FA and IA stand for operating, financing and investing activities, respectively.
b-- Increase or Decrease
- To record a business transaction, companies must ascertain whether the transaction has caused each of the related accounts to increase or decrease. A transaction may cause all related accounts to increase or decrease at the same time or can result in one account increasing while the other account decreases.
- For example, a cash sale transaction involves the revenue account and the cash account, which is an asset account, and makes both the revenue account and the cash asset account increase at the same time.
c-- Debit and Credit
- Debit and credit in accounting recording are not what they mean in the area of money and finance, but rather designations for different accounts and descriptions of any account changes in balances.
- The accounting recording system assigns all asset, expense and loss accounts as debit accounts and all liability, equity, revenue and gain accounts as credit accounts. A debit made to a debit account and a credit made to a credit account increase the balance of the respective accounts.
- On the contrary, a credit made to a debit account and a debit made to a credit account decrease the balance of the respective accounts.
d-- Balance Between Accounts
- The double-entry recording system always results in an equal amount recorded in the related accounts in the form of a debit entry and a credit entry. While a debit represents the money used in a transaction, a credit indicates the money source for the transaction.
- A company may make a debit entry to a debit account to show an increase for the account or make a debit entry to a credit account to register a decrease for the account. On the other hand, a company may make a credit entry to a debit account to display a decrease for the account or make credit entry to a credit account to demonstrate an increase for the account.
- For example, in a cash sale transaction using the double-entry system, a company makes a debit to the cash asset account, which is a debit account, to increase the amount of cash received from the sale, and makes a credit for the same amount to the revenue account, which is a credit account, to increase the amount of revenue as a result of the sale.
== In general, all steps of the recording process are performed in the following order:
1-- Analysis of source (business) documents
First, there should be a document showing that an accounting event took place. Such a document is usually called a source document:
Source documents are what accountants use to record accounting transactions. Source documents are also called business documents. Source document serves as a basis for an accounting entry and it varies. Some examples of source documents are invoices, material requisition forms, bank statements, and credit memos.
2-- Recording transactions in general journal
n Second, source documents are the basis for recording transactions in a chronological order in a journal. Each company has what is called the general journal or the book of original entry:
n General journal (book of original entry) contains records about all transactions of an entity. In particular, the journal includes such data as the event date, accounts involved, explanations and amount(s).
n In addition to the general journal, an entity may have other journals that relate to specific areas, like cash journal (includes information on cash transactions only) or a sales journal (includes information about sales transactions only).
n In addition to adjusting entries, closing entries must be made at the end of an accounting period: Closing entries are made to free up (to zero) the nominal (temporary) accounts so that they are prepared to be used in the next accounting period.
Nominal accounts are revenue, expense, and distribution accounts. All nominal accounts are closed to the Retained Earnings account.
== Single Entry vs. Double Entry:
- Earlier transactions in the books of accounts were recorded under single entry system. But this system had some shortcomings as there was not a complete record of all the transactions. Also problems were faced while preparing final accounts.
- Problems were also faced as there was no self-balancing system of accounting which could guarantee, to some extent, the accuracy of the books of accounts. So a need was felt for some uniformly accepted system of accounting which could help in the verification of the accuracy of books to some extent.
- These problems were solved by the Double Entry System of accounting. This system has totally replaced the single entry system. This system is now followed universally.
- So, in single entry only we can journalize the transaction of one side where in double entry preparing ledger accounts of both the side.
it's the fundamental principle of the accounting, In the double entry system, transactions are recorded in terms of debits and credits. a debit in one account will be offset by a credit in another account. Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to accurately prepare financial statements directly from the books of account and detect errors
It is the base of accounting process, what we called as Double accounting method.
Two aspects or legs of every transaction that is debit and credit......
one is a giver another is a taker. one is receivble another is payable. An asset and another is a liability. The trial balance should tally.
A double-entry accounting system tracks both aspects of any transaction: credit and debit. This dual concept system allows for any errors to be easily detected, and is essential in tracking the profit and/or liabilities of any business.
Two aspects or legs of every transaction that is debit and credit
one is receivble another is payable. An asset and another is a liability.
every business transactions have two aspects. one is givig aspect other is receiving aspect,here two aspect involved are cash and the book.these two aspect can be seen in every transaction.n in accounting these two aspects of a transaction are termed as debit aspect and the credit aspect , so these are helpful for recording the business transactions . this concept is the basis of double entry system.
Its very simple, for each and every debit there is equal credit and vice versa thats called double entry system.
A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts.
debits and credits
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