Double Entry System or Double Entry Bookkeeping

Double Entry System or Double Entry Bookkeeping

Double entry system of bookkeeping is a method of recording business transactions based on a set of rule “for every debit, there is credit and for every credit, there is debit”. It is based on the formula “Assets = Liabilities + Equity (Capital)”

For example, a person enters a transaction of borrowing money from the financial institution. So, this will increase the assets for cash account and the liability for loan payable account will also increase.