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Define Double entry system

Double entry system can be defined as the involvement of two or more accounts in the any and every business transaction. In other words, double entry is a fundamental concept of underlying present day bookkeeping and accounting.

Let’s take an example of a company asking for a loan from the bank. Under such a scenario, the cash account with associated liability account with amount payable will increase.

The procedure will be followed with the accounting equation, “equity=assets-liabilities”

After the equation statement is served right, the third aspect of double entry shall be served. It states that the amount in general ledger accounts (as debits) should be equal to th amount stated in credit.

The fundamental concept of double entry is that it is derived from the use of debit and credit to record all business transactions.

Technically, in bookkeeping and accounting, the expenses, the assets, and losses accounts are listed on the left side of a bookkeeping sheet, and the liability, equity, gain and revenue accounts are listed on the right side, with two sides maintaining the same output.

Types of accounts

There are mainly seven different types of accounts by which all the business transaction can relate to, i.e., assets, liabilities, equity, revenue, expenses, gain and losses.

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