Accounting. Double Entry: Essence and Meaning (Most Important)

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Accounting. Double Entry: Essence and Meaning (Most Important)

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21. Double Entry: Essence and Meaning

Each business transaction is a movement (change) of the enterprise's funds and causes a change in two interrelated accounting objects, therefore, in two balance sheet items. To obtain information about the movement of each accounting object, accounting accounts are opened that record each movement of the accounting object. There is a need to record one operation twice, on two interconnected accounts. Operations on accounts are reflected in the double entry way.

double entry - this is a simultaneous and interconnected reflection of a business transaction on the debit of one account and the credit of another account in the same amounts.

All transactions must be documented. Transaction records are compiled from documents.

Accounting entry - posting - call the transaction record, i.e., an indication of the debit and credit accounts into which the transaction amount is recorded.

Correspondence of invoices - the relationship that has arisen between accounts as a result of double entry on them.

Corresponding accounts call the accounts used to reflect the operation by double entry.

The procedure for recording operations by double entry:

▪ transaction of the first type is reflected in the debit and credit of the active account;

▪ the second type transaction is reflected in the debit and credit of the passive account;

▪ a third type transaction is reflected in the debit of the active account and the credit of the passive account;

▪ the fourth type transaction is reflected in the debit of the passive account and the credit of the active account.

Its use provides the possibility of self-control, as it allows you to balance the totals of entries in the accounts. Using double entry, one account is debited, the other account is credited with the same amount. If the breakdown of operations on accounts is correctly done, then the sum of the debit turnovers of all accounts and the sum of the credit turnovers of all accounts will be equal. If the amount on the offsetting account is erroneously changed or the entry is made on the same side of the offsetting accounts (incorrectly transferred balance), then the revealed inequality of debit and credit turnovers on the accounts means an error in the amount or in the nature of the recorded operation.

At the same time, the double entry is of educational value, as it shows where the funds came from and where they are going. Accounts are recorded on the basis of documents, so all accounting documents are subject to accounting processing, one of the stages of which is the recording of offsetting accounts for each operation reflected in the document. Determination and entry on the documents of the corresponding accounts - account assignment. Account assignment is accompanied by the signature of the accountant who made it.

The use of double entry ensures constant self-control over the correctness of the amount posted to the accounts and over the legitimacy (economic content) of the operation performed.

The reflection of a business transaction on an account is called posting. To make an accounting entry means to indicate on which side of which accounts the amount of the transaction should be recorded.

Distinguish wiring: simple - in which only two accounts correspond; complex - in which one account corresponds with several accounts.

Author: Kabkova E.N.

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