Accounting (ACCT 101 & ACCT 102)

Double entry accounting

As the name itself implies, double entry accounting is an accounting method where every financial transaction has equal and opposite effects in at least two different accounts. More simply: it’s a way of tracking inflows and outflows of money. This is where debits and credits come in.

Transactions are recorded in terms of debits and credits. A debit in one account offsets a credit in another, so the sum of all debits must equal the sum of all credits.

  • Debits are accounting entries that either increase an asset or expense account, or decrease a liability or equity account. A debit is on the left side when you record transactions.
  • Credits are accounting entries that either increase a liability or equity account, or decrease an asset or expense account. A credit is on the right side when you record transactions.

You deal with debits and credits in both the journal and general ledger:

  • the Journal is where transactions first get recognized – they get recorded in order, according to the date the transaction occurred
  • the General Ledger is essentially a 'book' that tracks all the important accounts (assets, liabilities, equity, revenues, and expenses) in the infamous T shape – i.e. the T-accounts

Whether in a journal entry or a T-account in the ledger, debits go on the left and credits go on the right:

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Want to know how debits and credits affect each kind of account?

Check out this very detailed list of account types:https://www.principlesofaccounting.com/account-types/. It gives you the names of each account, states what it's classified as (asset, liability, equity, expense, gain, etc), and whether it is increased or decreased by debits and credits.

Check out more useful links below!

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