Double Entry Bookkeeping

1. In any exchange of money, goods, or services, more than one person is involved. Thus there must be two aspects to every transaction – debit and credit. Double entry does not mean that the same transaction is entered twice but that both the debit and the credit side of the transaction are recorded.

2. The simplest set of double entry books consists of a journal and a ledger. Recording a transaction in a journal marks the initial point for the double entry bookkeeping system. Depending on their nature, certain accounts are increased with debits and decreased with credits; other accounts are increased with credits and decreased with debits. For example, the purchase of merchandise for cash increases the merchandise account (a debit) and decreases the cash account (a credit). If merchandise is purchased on the basis of a promise to make a future payment, a liability will be created, and the journal entry will record an increase in the merchandise asset account (a debit) and an increase in a liability account (a credit).

3. In the next step in the accounting cycle, the amounts that appear in the various journals are transferred to the organization's general ledger. This procedure is called posting. A ledger is a book which has one page for each account in the organization's financial structure. The page for each account shows its debits on the left side and its credits on the right side, so that each account’s balance – that is, the net credit or net debit amount – can be determined.

4. In addition to the general ledger, a subsidiary ledger is used to provide information in greater detail about the accounts in the general ledger. For example, the general ledger contains one account showing the entire amount owed to the enterprise by all its customers; the subsidiary ledger breaks this amount down showing a separate subsidiary account for each customer. Subsidiary accounts may also be kept for the wages paid to each employee, for each building or machine owned by the company, and for amounts owed to each of the enterprise's creditors.

5. After posting data to the ledger, the balances of all the accounts are to be calculated to determine whether the sum of all the debit balances agrees with the sum of all the credit balances (because every transaction has been listed once as a debit and once as a credit). This determination is called a trial balance. The total of the debits must equal the total of the credits. Disagreement between totals shows there is an error in the records. This procedure and those that follow it – the profit and loss statement, and the balance sheet – are usually prepared at the end of the fiscal period.

Notes:

double entry – система двойной записи

double entry bookkeeping – бухгалтерский учет по системе двойной записи

journal – бухгалтерский журнал

ledger – бухгалтерская книга

general ledger – главная книга

subsidiary ledger – вспомогательная книга (регистр субсчетов)

merchandise account – счет «Товары»

cash account – счет денежных средств (счет «Касса»)

liability – задолженность, обязательство

entry – проводка, бухгалтерская запись

asset account – счет актива