Double-entry bookkeeping

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Double-entry bookkeeping

Accounting method that records each transaction as both a credit and a debit in different accounts.

Double-Entry Bookkeeping

A system of accounting where every transaction is recorded as a debit to one account and a credit to another. That is, one who uses a double-entry bookkeeping system records each transaction twice, such that each credit (representing revenue) is recorded as a credit to one's capital account and as a debit on one's bank account. For example, if a company sells a product for $100, it adds $100 to its capital account and subtracts $100 to its bank account. One way of conceptualizing the bank account is from the bank's perspective: the debits are debits because any asset in a bank account represents a liability for the bank; this is why they are subtracted instead of added. However, the data are recorded twice to prevent errors in bookkeeping: the total debits and credits recorded should add to zero.
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Double entry accounting is not an artificial construct but is a natural representation of business events.
Despite recent changes in the CPA examination there is no indication that the CPA examiners have changed there mind as to the importance of double entry accounting for recording transaction and events.
Some have asserted the with the advent of computerized information systems, double entry accounting as we know it is no longer relevant.
Despite these criticisms, double entry accounting remains relevant today for a number of reasons, as follows.
Double entry accounting provides a platform for understanding the workings of virtually all accounting information systems.
There is also a need for introduction of double entry accounting system in the EPFO.