Double Entry

February 15, 2016

Double Entry Bookkeeping Principle

The double entry bookkeeping principle is profoundly important in the world of accounting. It is essential that students of accounting gain an understanding, from the outset, of this principle that is more than 500 years old. This best way to explain the double entry bookkeeping principle is to give an example of transactions from the books of the imaginary organisation called Lots of Fun Pty Ltd. Example 1: Lots of Fun Pty Ltd purchased a car for $5,000 using a loan from the bank, the two effects are: Lots of Fun Pty Ltd acquires an ASSET worth $5,000 (the car). This is the debit affect. At the same time it also incurs a LIABILITY to the bank of $5,000 (the […]