The Double Entry System Of Book-keeping

Every business transaction has two sides. When a shop buys a delivery van it gains a van but parts with money; when it borrows from a bank it gains cash but takes on a debt. The double entry system of book-keeping is the elegant idea that we record both sides of every transaction, once as a debit and once as a credit, in separate ledger accounts. Because the two sides are always equal, the books stay permanently in balance and the whole accounting framework is built on this single, dependable rule.

In this lesson you will learn how a ledger account is laid out, how to decide which account to debit and which to credit, and how to balance an account at the end of a period. You will post real transactions for assets, liabilities, expenses, income, drawings, purchases, sales and returns, then see how the ledger is divided into the sales, purchases and nominal ledgers. These are the foundation skills that every later topic in the course quietly depends on.