Chapter 3

Recording: Double-entry book keeping

‘Old accountants never die, they just lose their balance.’



Learning Outcomes

After completing this chapter you should be able to:

  • Outline the accounting equation.
  • Understand double-entry bookkeeping.
  • Record transactions using double-entry bookkeeping.
  • Balance off the accounts and draw up a trial balance.

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Chapter Summary

  • Double-entry bookkeeping is an essential underpinning of financial accounting.
  • The accounting equation provides the structure for double-entry.
  • Assets and expenses are increases in debits recorded on the left-hand side of the ‘T’ (i.e., ledger) account.
  • Income and equity are increases in credits recorded on the right-hand side of the ‘T’ (i.e., ledger) account.
  • Debits and credits are equal and opposite entries.
  • Initial recording in the books of account using double-entry, balancing off and preparing the trial balance are the three major steps in double-entry bookkeeping.
  • The trial balance is a listing of all the balances from the accounts.
  • The debits and credits in a trial balance should balance.

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