Welcome back to our blog today we are going to talk about the double entry system so if you are searching for the b.com 1st year financial accounting notes then you should read this post till the end.

 double entry principle

So let's start our post with the double-entry principle:

FoundationThe double entry principle is the foundation of modern accounting systems.
Dual AspectEvery transaction affects at least two accounts, with a dual impact on the accounting equation.
Debits and CreditsEach transaction involves recording at least one debit and one credit entry.
Balancing EquationDebits must equal credits in every transaction to maintain the balance of the accounting equation (Assets = Liabilities + Equity).
Financial Statement PreparationThe double entry principle ensures accurate preparation of financial statements like the balance sheet, income statement, and cash flow statement.
Accuracy and IntegrityBy requiring dual entries, the principle enhances the accuracy and integrity of financial records.
Identification of ErrorsDiscrepancies in accounts can be easily identified through the application of the double-entry principle.
Systematic RecordingIt provides a systematic method for recording financial transactions, ensuring completeness and consistency in accounting records.
Analysis and Decision-MakingFacilitates financial analysis and decision-making processes by providing reliable and comprehensive financial information.
Legal and Regulatory ComplianceAdhering to the double entry principle ensures compliance with legal and regulatory requirements governing financial reporting.

Now If we talk about The first stage of the double entry system is the recording of a financial transaction in the journal through journal entries.

rules of the double entry system

The topic I am talking about is the rules of the double-entry system. These rules tell you the steps to do bookkeeping such as:

Identify TransactionDetermine the financial transaction that needs to be recorded.
Analyze AccountsIdentify the accounts affected by the transaction and classify them into appropriate categories such as assets, liabilities, equity, income, and expenses.
Determine Debits and CreditsApply the rules of debit and credit to determine which accounts will be debited and credited based on the nature of the transaction.
Record Journal EntriesMake journal entries by recording the debit and credit amounts in the appropriate accounts, ensuring that the total debits equal the total credits.
Post to LedgerTransfer the journal entries to respective ledger accounts to maintain a systematic record of individual transactions for each account.
Prepare Trial BalancePrepare a trial balance by listing all the ledger account balances to ensure that the total debits equal the total credits, thereby verifying the accuracy of the recording process.
Adjustment EntriesMake necessary adjustment entries to correct errors or omissions and ensure that the financial statements reflect the business's true financial position and performance.
Prepare Financial StatementsUse the adjusted trial balance to prepare financial statements such as the income statement, balance sheet, and cash flow statement to provide insights into the financial performance and position of the business.
Analyze and InterpretAnalyze the financial statements to interpret the financial health of the business and make informed decisions regarding operations, investments, and financing.
Compliance and ReportingEnsure compliance with legal and regulatory requirements by accurately reporting financial information following applicable accounting standards and regulations.

double entry bookkeeping examples pdf

Now let's take an example for double entry bookkeeping so that you can understand the basics.

Let's say a company, ABC Corp., purchases office supplies for 5000 in cash.

  • Identify Transaction: The purchase of office supplies for $500 in cash is the transaction that needs to be recorded.

  • Analyze Accounts: The accounts affected by this transaction are:

Office Supplies (Asset)

Cash (Asset)

  • Determine Debits and Credits:

Office Supplies (Asset) is increased, so it is debited.

Cash (Asset) is decreased, so it is credited.

  • Record Journal Entries:

Debit Office Supplies for 5000

Credit Cash for 5000

  • Post to Ledger:

Transfer the journal entries to the respective ledger accounts:

  • Office Supplies Account: Debit 5000
  • Cash Account: Credit 5000

  • Prepare Trial Balance:

At this point, we won't prepare a trial balance since it's just one transaction. But if there were multiple transactions, we would prepare a trial balance to ensure debits equal credits.

  • Adjustment Entries: None is required for this simple transaction.

  • Prepare Financial Statements: Since it's just one transaction, we won't prepare financial statements here. However, this transaction would impact the balance sheet (assets increase by $500) and potentially the income statement if office supplies are used for generating revenue.

  • Analyze and Interpret: This transaction shows that ABC Corp. has purchased office supplies for $500 in cash, which will be used for its operations.

  • Compliance and Reporting: Ensure that this transaction is accurately recorded in compliance with accounting standards and regulations for financial reporting purposes.


Here in this post, we add all related info like rules of the double entry system, double accounting system pdf, double-entry bookkeeping examples pdf, and more so if you are making notes for double entry system then you should read this spot till the end.