What is double entry bookkeeping?
Double entry bookkeeping is a system of accounting where every transaction is reflected in two accounts: credit and debit. There are always two columns for transactions – one for debit entries and one for credit entries. One account will be debited because it receives value and another will be credited.
How to do double entry bookkeeping
When you are keeping double entry records the main thing to remember is that the left page or column is always for debit entries while credits are recorded on the right. When a debit or expense is added it reduces the credit or income account and when a credit account is increased the debit side decreases.
Example: Your company provided a service and issued an invoice for 300 USD with 30 day due date. As the service was performed and the revenue was earned you add the 300 USD in the Service Revenue account with credit. As the payment is still to come, you cannot add this amount to cash yet. That’s why you need to use Account Receivable and debit it with 300 USD.
The main rules of double entry bookkeeping are
- The capital invested by the business owner must be recorded along with the business assets and liabilities
- For every transaction the value of debits must equal the value of credits
- Every time a business transaction takes place an entry has to be made on both sides of the spreadsheet or ledger
Are you asking yourself how to do double entry bookkeeping quickly and without fuss ? Why not let MoneyPenny do the work for you?
MoneyPenny account speeds up and simplifies the double entry book keeping process. Keeping all sales and expenses data in one place helps your business save valuable time and money. You can also invite your tax consultant to do the work for you.