Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account. The double entry has two equal and corresponding sides known as debit and credit. The left-hand side is debit and right-hand side is credit. For instance, recording a sale of $100 might require two entries: a debit of $100 to an account named "Cash" and a credit of $100 to an account named "Revenue."
is an error detection tool; if at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. However, satisfying the equation does not guarantee that there are no errors; the ledger may still "balance" even if the wrong ledger accounts have been debited or credited.
Double-entry bookkeeping was pioneered in the Jewish community of the early-medieval Middle East. Jewish bankers in Old Cairo, for example, used a double-entry bookkeeping system which predated the known usage of such a form in Italy, and whose records remain from the 11th century AD. It has been hypothesized that Italian merchants likely learned the method from their interaction with medieval Jewish merchants from the Middle East, but this question remains an area for further research. The oldest European record of a complete double-entry system is the Messari (Italian: Treasurer's) accounts of the Republic of Genoa in 1340. The Messari accounts contain debits and credits journalised in a bilateral form, and include balances carried forward from the preceding year, and therefore enjoy general recognition as a double-entry system. By the end of the 15th century, the bankers and merchants of Florence, Genoa, Venice and Lübeck used this system widely.
However, the double-entry accounting method was said to be developed independently earlier in Korea during the Goryeo dynasty (918–1392) when Kaesong was a center of trade and industry at that time. The Four-element bookkeeping system was said to be originated in the 11th or 12th century.
The earliest extant accounting records that follow the modern double-entry system in Europe come from Amatino Manucci, a Florentine merchant at the end of the 13th century. Manucci was employed by the Farolfi firm and the firm's ledger of 1299-1300 evidences full double-entry bookkeeping. Giovannino Farolfi & Company, a firm of Florentine merchants headquartered in Nîmes, acted as moneylenders to the Archbishop of Arles, their most important customer. Some sources suggest that Giovanni di Bicci de' Medici introduced this method for the Medici bank in the 14th century.
Ragusan economist Benedetto Cotrugli's 1458 treatise Della mercatura e del mercante perfetto contained the earliest known description of a double-entry bookkeeping system, but his manuscript was not officially published until 1573.
Luca Pacioli, a Franciscan friar and collaborator of Leonardo da Vinci, first codified the system in his mathematics textbook Summa de arithmetica, geometria, proportioni et proportionalità published in Venice in 1494. Pacioli is often called the "father of accounting" because he was the first to publish a detailed description of the double-entry system, thus enabling others to study and use it.
In the double-entry accounting system, at least two accounting entries are required to record each financial transaction. These entries may occur in asset, liability, equity, expense, or revenue accounts. Recording of a debit amount to one or more accounts and an equal credit amount to one or more accounts results in total debits being equal to total credits for all accounts in the general ledger. If the accounting entries are recorded without error, the aggregate balance of all accounts having Debit balances will be equal to the aggregate balance of all accounts having Credit balances. Accounting entries that debit and credit related accounts typically include the same date and identifying code in both accounts, so that in case of error, each debit and credit can be traced back to a journal and transaction source document, thus preserving an audit trail. The accounting entries are recorded in the "Books of Accounts". Regardless of which accounts and how many are impacted by a given transaction, the fundamental accounting equation of assets equal liabilities plus capital will hold.
There are two different ways to memorize the effects of debits and credits on accounts in the double entry system of bookkeeping. They are the Traditional Approach and the Accounting Equation Approach. Irrespective of the approach used, the effect on the books of accounts remains the same, with two aspects (debit and credit) in each of the transactions.
Following the Traditional Approach (also called the British Approach) accounts are classified as real, personal, and nominal accounts. Real accounts are accounts relating to assets and liabilities including the capital account of the owners. Personal accounts are accounts relating to persons or organisations with whom the business has transactions and will mainly consist of accounts of debtors and creditors. Nominal accounts are revenue, expenses, gains, and losses. Transactions are entered in the books of accounts by applying the following golden rules of accounting:
This approach is also called the American approach. Under this approach transactions are recorded based on the accounting equation, i.e., Assets = Liabilities + Capital. The accounting equation is a statement of equality between the debits and the credits. The rules of debit and credit depend on the nature of an account. For the purpose of the accounting equation approach, all the accounts are classified into the following five types: assets, liabilities, income/revenues, expenses, or capital gains/losses.
If there is an increase or decrease in a set of accounts, there will be equal decrease or increase in another set of accounts. Accordingly, the following rules of debit and credit hold for the various categories of accounts:
These five rules help learning about accounting entries and also are comparable with traditional (British) accounting rules.
Each financial transaction is recorded in at least two different nominal ledger accounts within the financial accounting system, so that the total debits equals the total credits in the general ledger, i.e. the accounts balance. This is a partial check that each and every transaction has been correctly recorded. The transaction is recorded as a "debit entry" (Dr) in one account, and a "credit entry" (Cr) in a second account. The debit entry will be recorded on the debit side (left-hand side) of a general ledger account, and the credit entry will be recorded on the credit side (right-hand side) of a general ledger account. If the total of the entries on the debit side of one account is greater than the total on the credit side of the same nominal account, that account is said to have a debit balance.
Double entry is used only in nominal ledgers. It is not used in daybooks (journals), which normally do not form part of the nominal ledger system. The information from the daybooks will be used in the nominal ledger and it is the nominal ledgers that will ensure the integrity of the resulting financial information created from the daybooks (provided that the information recorded in the daybooks is correct).
The reason for this is to limit the number of entries in the nominal ledger: entries in the daybooks can be totalled before they are entered in the nominal ledger. If there are only a relatively small number of transactions it may be simpler instead to treat the daybooks as an integral part of the nominal ledger and thus of the double-entry system.
However, as can be seen from the examples of daybooks shown below, it is still necessary to check, within each daybook, that the postings from the daybook balance.
The double entry system uses nominal ledger accounts. From these nominal ledger accounts a trial balance can be created. The trial balance lists all the nominal ledger account balances. The list is split into two columns, with debit balances placed in the left hand column and credit balances placed in the right hand column. Another column will contain the name of the nominal ledger account describing what each value is for. The total of the debit column must equal the total of the credit column.
Double-entry bookkeeping is governed by the accounting equation. If revenue equals expenses, the following (basic) equation must be true:
For the accounts to remain in balance, a change in one account must be matched with a change in another account. These changes are made by debits and credits to the accounts. Note that the usage of these terms in accounting is not identical to their everyday usage. Whether one uses a debit or credit to increase or decrease an account depends on the normal balance of the account. Assets, Expenses, and Drawings accounts (on the left side of the equation) have a normal balance of debit. Liability, Revenue, and Capital accounts (on the right side of the equation) have a normal balance of credit. On a general ledger, debits are recorded on the left side and credits on the right side for each account. Since the accounts must always balance, for each transaction there will be a debit made to one or several accounts and a credit made to one or several accounts. The sum of all debits made in each day's transactions must equal the sum of all credits in those transactions. After a series of transactions, therefore, the sum of all the accounts with a debit balance will equal the sum of all the accounts with a credit balance.
Debits and credits are numbers recorded as follows:
The mnemonic DEADCLIC is used to help remember the effect of debit or credit transactions on the relevant accounts. DEAD: Debit to increase Expense, Asset and Drawing accounts and CLIC: Credit to increase Liability, Income and Capital accounts.
The account types are related as follows:
current equity = sum of equity changes across time (increases on the left side are debits, and increases on the right side are credits, and vice versa for decreases)
current equity = Assets - Liabilities
sum of equity changes across time = owner's investment (Capital above) + Revenues - Expenses
In the late sixteenth-century [...] number still carried the pejorative connotations associated with necromancy [...]. [...] [D]ouble-entry bookkeeping helped confer cultural authority on numbers. It did so by means of the balance [...]. For late sixteenth-century readers, the balance conjured up both the scales of justice and the symmetry of God's world.
AME Accounting Software is a business accounting software application developed by AME Software Products, Inc.
AME Accounting Software includes Payroll, General Ledger, Accounts Receivable, Accounts Payable, 1099 Vendor Management, MICR check printing, and Direct Deposit. The software is mostly used by small and medium size businesses, as well as accounting practices that process payroll and do bookkeeping for other businesses.
The General Ledger software implements a double-entry bookkeeping system, and all modules are able to post entries to General Ledger.
The General Ledger software features comprehensive reports, that include Income Statement, Balance Sheet, Cash Flow Statement, Trial Balance Worksheet. The Payroll software calculates federal and state taxes, prints W2, 1099, and payroll checks, and is capable of producing reports for 50 states.
AME Accounting Software was initially developed for DOS. In 1998 AME released payroll software for Windows.
The current version, AME 2.0 released in 2004, includes all features that are required for running a small business or an accounting practice. The user interface is simple and intuitively understandable.
As noted in 2008 June/July issue of CPA Technology Advisor Magazine: "AME offers a good payroll module and core financial functions that are sufficient for smaller entities, especially for businesses with limited technical expertise. It is attractively priced and covers the basic needs of a small company." AME stands for Accounting Made Easy.Accounting equation
The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business. It is the foundation for the double-entry bookkeeping system. For each transaction, the total debits equal the total credits. It can be expressed as further more.
In a corporation, capital represents the stockholders' equity. Since every business transaction affects at least two of a company's accounts, the accounting equation will always be “in balance,” meaning the left side should always equal the right side. Thus, the accounting formula essentially shows that what the firm owns (its assets) is purchased by either what it owes (its liabilities) or by what its owners invest (its shareholders equity or capital).
For example: A student buys a computer for $900. To pay for the computer, the student uses $400 in cash and borrows $500 for the remainder. Now his assets are worth $900, liabilities are $500, and equity $400.
The formula can be rewritten:
Now it shows owners' interest is equal to property (assets) minus debts (liabilities). Since in a corporation owners are shareholders, owner's interest is called shareholders' equity. Every accounting transaction affects at least one element of the equation, but always balances. Simple transactions also include:
These are some simple examples, but even the most complicated transactions can be recorded in a similar way. This equation is behind debits, credits, and journal entries.
This equation is part of the transaction analysis model, for which we also write
The equation resulting from making these substitutions in the accounting equation may be referred to as the expanded accounting equation, because it yields the breakdown of the equity component of the equation.Albert Gallatin Scholfield
Albert Gallatin Scholfield (1807–1901) was the founder of Scholfield's Commercial College in Providence, Rhode Island, the first business school in the state.
Albert Gallatin Scholfield was born in 1807 to John and Betsy Scholfield of Jewett City, Connecticut. The Scholfields were a family of wool manufacturers. Albert Scholfield married Harriet Newell Bolles, and after her death re-married. In 1846 Scholfield moved to Providence, Rhode Island. He was a supporter of the double-entry bookkeeping system, while the merchants in Providence were using the single-entry system. Albert published books about accounting stressing not only the mathematical concepts but also the legal, morality, and fiduciary duties. To teach the new method, in June 1846 Scholfield founded Scholfield's Commercial College in downtown Providence as the first business school in the city. Eventually the double-entry method became the dominant accounting system in town. Scholfield is buried in the Swan Point Cemetery.Bartolomeo Pollastri
Bartolomeo Pollastri (... – 18th century) was an Italian mathematician and astronomer.Basil Yamey
Basil S. Yamey, CBE (born 4 May 1919) is a South African economist. He was born in Cape Town in South Africa, and educated at the University of Cape Town. For many years he was a Professor at the London School of Economics. He was a part-time member of the Monopolies and Mergers Commission from 1966 to 1978, and author of many books and articles, including one on the economics of underdeveloped countries co-authored with Peter Thomas Bauer.
Yamey's interest in rational economic decision-making led him to study historical accounting records. Yamey rejected the claim by Werner Sombart that the double-entry bookkeeping system was a pre-condition, or at least an important stimulating factor, for the emergence of modern capitalism. Yamey combined his interest in Accounting History with his love of art (he was a trustee of the National Gallery, London from 1974 to 1981 and of the Tate Gallery, London from 1978 to 1981) in his book Art & Accounting, a richly-illustrated survey of paintings portraying commercial scenes and business-people.Booking
Booking may refer to:
Booking (manhwa), a Korean comics anthology magazine published by Haksan
Booking (professional wrestling), the laying out of the plot before a professional wrestling match
An accounting system a.k.a. double-entry bookkeeping system
Booking (clubbing), the practise of forced socialisation in South Korean clubs
Booking Holdings, American company
Booking.com, a website for arranging hotel reservations
Booking, scheduling services performed by a talent agent
The noting of an offending player in professional sports, when they are shown a Penalty cardBookkeeping
Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. There are several standard methods of bookkeeping, including the single-entry and double-entry bookkeeping systems. While these may be viewed as "real" bookkeeping, any process for recording financial transactions is a bookkeeping process.
Bookkeeping is the work of a bookkeeper (or book-keeper), who records the day-to-day financial transactions of a business. They usually write the daybooks (which contain records of sales, purchases, receipts, and payments), and document each financial transaction, whether cash or credit, into the correct daybook—that is, petty cash book, suppliers ledger, customer ledger, etc.—and the general ledger. Thereafter, an accountant can create financial reports from the information recorded by the bookkeeper.
Bookkeeping refers mainly to the record-keeping aspects of financial accounting, and involves preparing source documents for all transactions, operations, and other events of a business.
The bookkeeper brings the books to the trial balance stage: an accountant may prepare the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.Comparison of accounting software
The following comparison of accounting software documents the various features and differences between different professional accounting software and personal finance packages. The comparison only focus considering financial and external accounting functions. No comparison is made for internal/management accounting, cost accounting, budgeting, or integrated MAS accounting.DEBS
DEBS may refer to:
Double-entry bookkeeping system
Distributed Event-Based Systems Conference
DEBS (6-deoxyerythronolide B synthase)D.E.B.S. may refer to:
D.E.B.S. (2003 film), the short film that garnered seven film festival awards
D.E.B.S. (2004 film), the feature-length film spawned by the short film of the same nameGeneral ledger
A general ledger contains all the accounts for recording transactions relating to a company's assets, liabilities, owners' equity, revenue, and expenses. In modern accounting software or ERP, the general ledger works as a central repository for accounting data transferred from all subledgers or modules like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. The general ledger is the backbone of any accounting system which holds financial and non-financial data for an organization. The collection of all accounts is known as the general ledger. Each account is known as a ledger account. In a manual or non-computerized system this may be a large book.
The statement of financial position and the statement of income and comprehensive income are both derived from the general ledger. Each account in the general ledger consists of one or more pages. The general ledger is where posting to the accounts occurs. Posting is the process of recording amounts as credits (right side), and amounts as debits (left side), in the pages of the general ledger. Additional columns to the right hold a running activity total (similar to a chequebook).
The listing of the account names is called the chart of accounts. The extraction of account balances is called a trial balance. The purpose of the trial balance is, at a preliminary stage of the financial statement preparation process, to ensure the equality of the total debits and credits.
The general ledger should include the date, description and balance or total amount for each account. It is usually divided into at least seven main categories. These categories generally include assets, liabilities, owner's equity, revenue, expenses, gains and losses. The main categories of the general ledger may be further subdivided into subledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc.
Because each bookkeeping entry debits one account and credits another account in an equal amount, the double-entry bookkeeping system helps ensure that the general ledger is always in balance, thus maintaining the accounting equation:
The accounting equation is the mathematical structure of the balance sheet. Although a general ledger appears to be fairly simple, in large or complex organizations or organizations with various subsidiaries, the general ledger can grow to be quite large and take several hours or days to audit or balance.GnuCash
GnuCash is an accounting program that implements a double-entry bookkeeping system. It was initially aimed at developing capabilities similar to Intuit, Inc.'s Quicken application, but also has features for small business accounting. Recent development has been focused on adapting to modern desktop support-library requirements.
GnuCash is part of the GNU Project, and runs on Linux, GNU, OpenBSD, FreeBSD, Solaris, macOS, and other Unix-like platforms. A Microsoft Windows (2000 or newer) port was made available starting with the 2.2.0 series.History of accounting
The history of accounting or accountancy is thousands of years old and can be traced to ancient civilizations.The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems by the ancient Egyptians and Babylonians. By the time of the Roman Empire, the government had access to detailed financial information.In India Chanakya wrote a manuscript similar to a financial management book, during the period of the Mauryan Empire. His book "Arthashasthra" contains few detailed aspects of maintaining books of accounts for a Sovereign State.
The Italian Luca Pacioli, recognized as The Father of accounting and bookkeeping was the first person to publish a work on double-entry bookkeeping, and introduced the field in Italy.The modern profession of the chartered accountant originated in Scotland in the nineteenth century. Accountants often belonged to the same associations as solicitors, who often offered accounting services to their clients. Early modern accounting had similarities to today's forensic accounting. Accounting began to transition into an organized profession in the nineteenth century, with local professional bodies in England merging to form the Institute of Chartered Accountants in England and Wales in 1880.Index of accounting articles
This page is an index of accounting topics.Moneydance
Moneydance is a personal finance software application developed by The Infinite Kind, formerly developed by Reilly Technologies, USA. Written in Java, it can be run on many different computers and operating systems. Under the hood, Moneydance implements a double-entry bookkeeping system, but the user interface is geared towards non-accountants.
Moneydance implements the OFX protocol to perform online banking and bill payment. Other features include check printing, graphing and reporting, scheduled transaction reminders, transaction tags, VAT/GST tracking, budget management and tracking, file encryption, and investment portfolio management.
Moneydance has been localized into French, German, UK English, Norwegian, Greek (partially), Spanish, Portuguese and Italian. UK supermarket Tesco's "Personal Finance" software is based on Moneydance.An open application programming interface (API) is also available, allowing people to write extensions to the program.
The application is scriptable in jython.Revenue
In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover.
Some companies receive revenue from interest, royalties, or other fees. Revenue may refer to business income in general, or it may refer to the amount, in a monetary unit, earned during a period of time, as in "Last year, Company X had revenue of $42 million". Profits or net income generally imply total revenue minus total expenses in a given period. In accounting, in the balance statement it is a subsection of the Equity section and revenue increases equity, it is often referred to as the "top line" due to its position on the income statement at the very top. This is to be contrasted with the "bottom line" which denotes net income (gross revenues minus total expenses).For non-profit organizations, annual revenue may be referred to as gross receipts. This revenue includes donations from individuals and corporations, support from government agencies, income from activities related to the organization's mission, and income from fundraising activities, membership dues, and financial securities such as stocks, bonds or investment funds.
In general usage, revenue is income received by an organization in the form of cash or cash equivalents. Sales revenue or revenues is income received from selling goods or services over a period of time. Tax revenue is income that a government receives from taxpayers.
In more formal usage, revenue is a calculation or estimation of periodic income based on a particular standard accounting practice or the rules established by a government or government agency. Two common accounting methods, cash basis accounting and accrual basis accounting, do not use the same process for measuring revenue. Corporations that offer shares for sale to the public are usually required by law to report revenue based on generally accepted accounting principles or International Financial Reporting Standards.
In a double-entry bookkeeping system, revenue accounts are general ledger accounts that are summarized periodically under the heading Revenue or Revenues on an income statement. Revenue account names describe the type of revenue, such as "Repair service revenue", "Rent revenue earned" or "Sales".Single-entry bookkeeping system
A single-entry bookkeeping system or single-entry accounting system is a method of bookkeeping relying on a one sided accounting entry to maintain financial information.Summa de arithmetica
Summa de arithmetica, geometria, proportioni et proportionalita (Summary of arithmetic, geometry, proportions and proportionality) is a book on mathematics written by Luca Pacioli and first published in 1494. It contains a comprehensive summary of Renaissance mathematics, including practical arithmetic, basic algebra, basic geometry and accounting, written in Italian for use as a textbook.
The Summa is the first printed work on algebra in a vernacular language, and it contains the first published description of the double-entry bookkeeping system. It set a new standard for writing and argumentation about algebra, and its impact upon the subsequent development and standardization of professional accounting methods was so great that Pacioli is sometimes referred to as the "father of accounting."