BUAD 803 GRADEABLE FORUM

Question:

Briefly explain your understanding of the double entry principle

The double-entry principle is the fundamental accounting concept that every financial transaction has
two equal and opposite effects, ensuring that the accounting equation stays balanced. For every debit
entry made in one account, there must be a corresponding credit entry in another account. This
principle is the basis of double-entry bookkeeping, which helps maintain accuracy in recording financial
transactions and ensures that assets equal liabilities plus equity at all times.

The double entry principle is a fundamental accounting concept that forms the basis of bookkeeping. It
states that for every transaction, there are at least two accounts affected, and the total debits must
equal the total credits. This principle is based on the concept of duality in accounting, ensuring accuracy
and maintaining the balance in financial records.

In a double entry system:

 Every transaction involves at least two accounts: one account receives a debit entry, and
another account receives a corresponding credit entry.

 Debits and credits must always balance, ensuring that the accounting equation (Assets =
Liabilities + Equity) remains in equilibrium.

 Debits and credits affect different types of accounts in opposite ways: an increase in assets is
debited, while a decrease is credited; liabilities and equity follow the opposite rule.

 The principle ensures accuracy by providing a systematic way to record financial transactions,
preventing errors and facilitating the preparation of accurate financial statements.