Contents:

1. Introduction
2. Very Basic Double Entry
3. Cash Transactions
4. Books of Prime Entry
5. Soletraders & Partnerships
6. Limited Companies
7. Credit Transactions
8. Accruals & Prepayments
9. Fixed Assets
10. Year-end Procedures
11. Reconciliations
12. Other Entries

2 - Very Basics of Double-Entry

Double Entry

The concept of double-entry may seem alien at first, but soon becomes second nature with a little practice.

As the name suggests, every transaction involves 2 equal & opposite entries - one Debit (Dr) & one Credit (Cr).

Total Drs should equal Crs, so it provides a built-in error check. Only misclassifications are missed - that is a Dr or Cr in the wrong place - or complete omissions of an entry.

We use "T" accounts to record the entries - imagine them as the 2 opposite pages of a book (as typical in a manual system).

Drs go on the left, Crs on the right. An easy way to remember this (provided you are English or Australian) is the following diagram:

Assets & Liabilities

An asset is something you own (e.g. a car) or the right to receive something in the future (e.g. a trade debtor).

A liability is where you owe something to someone else (e.g. a bank loan or trade creditors).

Assets & liabilities are Balance Sheet items (showing the position you are in), as opposed to income & expenses which are Profit & Loss (P&L) items.

The effect of Drs & Crs

The significance of each entry is summarised below:

In the next chapter we look at the basic cash-transaction entries.

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