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The Double-Entry System is a world wide used system to keep track of money.
The double-entry bookkeeping system is based on the principle of double
registration in the bookkeeping programme of all income and expenses, - one
debit and one credit entry.
- A debit for something coming in - money or other value
- A credit for something going out.
Every time you debit an amount you have to credit it too. And the other way
round.
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Subway map:
Understand Basic Accountancy
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Things you buy
You can think of it like this: When you pay out money from the cash box it
does not just disappear from you. The value of the thing you have bought is
coming into your company.
So in the PC bookkeeping programme you register the amount of money that was
"paid out" on the Cash/Bank-Account (credit).
And you register the value that was "put into" the company in
return, on the relevant account from the account plan (debit)
- Example:
If you buy 12 computer games to your shop, you take money out of the
cash box or the bank (which you credit the Cash/Bank-Account).
Then you enter value (12 computer games) into the shop (which you debit on
the Shop Purchase-Account account in the PC bookkeeping programme).
Things you sell
And opposite, the money that comes into the company does not just come out
of the blue.
When money comes in, some value goes out of the company.
So when you in the Cash/Bank-Account register the amount of money that came
in, you also register the value that was taken out of the project instead on the
relevant account in the account plan.
- Example:
The sale for a full day in the PC Game Store is registered in the PC
bookkeeping programme (which you debit the Cash/Bank-Account). Since you
have taken the value of the computer games out of the shop you also credit
the Shop Sale-Account .
Always both a debit and a credit
When you enter a debit on the Cash/Bank-Account you must enter a credit on
the relevant account from the account plan.
And opposite, when you enter a credit in the Cash/Bank-Account you must enter a
debit on the relevant account from the account plan.
- The debit in the Cash/Bank-Account balances with the credit on the
relevant account from the account plan
- The credit in the Cash/Bank-Account balances with the debit on the
relevant account from the account plan
The PC helps you
If the registered accounts in the debit and credit sides do not balance
there is a mistake somewhere in the registration. The PC bookkeeping programme
will usually attract your attention to the mis-balance in the entries.
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- Go to next business issue: Who is Able to do The Accounts
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| MUHAMED MUNDIR.E, INDIA |
16-01-2010 |
I am working accountant in large company MARUTI ZUZUKI IN ONE YEAR
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