The principles of double entry bookkeeping

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The principles and practice of double-entry bookkeeping

The MA1 syllabus includes a short section on the principles of double-entry book keeping, but that topic is explained in much more detail in our FA1 notes (downloadable from https://opentuition.com/fia/fa1/) or F3 notes (downloadable from https://opentuition.com/acca/f3/).

A full video lecture on double-entry bookkeeping is available free of charge on https://opentuition.com/acca/f3/double-entry-bookkeeping-part-a/

The basic principle of double entry bookkeeping is that there are always two entries for every transaction.

One entry is known as a credit entry and the other a debit entry.

The entries are often displayed in ‘T’ accounts:

Here are some simple, common transactions:

Purchase of office stationery for cash:

Debit Office stationery (increase in an expense)

Credit Cash (decrease in an asset)

A cash sale:

Debit Cash (increase in an asset)

Credit Sales (increase in income)

A credit sale:

Debit Receivables (increase in an asset)

Credit Sales (increase in income)

Payment by a customer of an amount owing:

Debit Cash (increase in an asset)

Credit Receivables (decrease in an asset)

Purchase, on credit, of goods for resale:

Debit Purchases (increase in an expense. ‘Purchases’ is the name given to purchases for resale)

Credit Payables (increase in a liability)

You should understand that if the double entry as been carried out properly, then the sum of the debit entries should always equal the sum of the credit entries. This should be regularly checked by compiling a trial balance, which is simply all the accounts listed in debit and credit columns and the lists added up. The totals should always agree.