Question

What is the double entry accounting system? Provide an example

Answer 1

The double entry accounting system means the syste in which every accounting transaction is recorded by passing two entries in the books of accounts. The double entry accounting system requires that every transaction requires a debit and a corresponding credit. This ensures that the proper recording of transactions is done.

Example : Purchases of $ 5,000 made on credit.

This transaction would affect two accounts namely, Purchases account and Accounts Payable. In this transaction the purchases account is debited and the accounst payable account is credited.