Accounts

Characteristics of Double Entry System

len Alfred Ajibola - Fri, 03rd April, 2020 @ 09:41: AM

Topics in Accounts

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Academic Questions in Accounts

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Which of the following statement is true concerning bank wire?

  • A. Another name for bank wire is cash transfer

  • B. The term 'wire' in bank wire signifies a computer based programmed message sent to a bank customer in regards to their account information, transaction and other important financial notifications

  • C. The International Bank Account Number (IBAN) must always be involved when carrying out a bank wire process

  • D. The term bank wire has no significant relationship with wire transfer

  • E. Cyber criminals cannot utilize bank wire threats like CSRS, phishing and whaling to achieve their fradulent act

  • F. All the above statements are true

The following are recommendations to follow during the process of balance sheet reconciliation EXCEPT _____.

  • A. All balance sheet accounts should be reconciled periodically, quarterly or annually

  • B. Comparing the trial balance of both the payables and receivables with the respective aging schedule

  • C. Analysis of enteries and relocating them to a sub-ledger if need be

  • D. Comparing the general ledger trial balance of the account to another source; for instance, a bank statement

  • E. Analysis of the differences in both accounts and making appropriate correction to ensure the correctness of entered information

  • F. None of the above

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Characteristics of the Double Entry System:

The principle of double entry system is an important aspect of accounting. It states that:

For every debit, there must be a corresponding credit for an equal amount of money; and for every credit, there is a corresponding debit for an equal amount of money.

In simple terms, whatever is recorded on the debit side must be equivalent or equal to that recorded on the credit side of the account. This implies that the debit must always be equal to the credit in a dual entry system.
Double Entry System - Len Academy

Please read on the Introduction to the Principle of Double Entry here.

The debit and credit sides make up the transactional aspects that are identified under the principle of double entry. The debit side of the transaction (abbreviated as Dr) is always present on the left side of the account while the credit side of the transaction (abbreviated as Cr) is written to its right.

Note: The process of keeping an account of dual entry (corresponding Debit and Credit) is referred to as dual or double entry system of accounting.

Please read on various examples of the Double Entry here.

To get a better understanding on the characteristics of the double entry system, it's a good idea if we first understood the concepts (or characteristics) of Debit (Dr) and Credit (Cr) sides of an account. They are summarized below:


Characteristics of Debit and Credit sides of an account

  • On the DEBIT side; there is an increase in expense.
  • On the CREDIT side; there is a decrease in expense.

  • On the DEBIT side; there is an increase in asset.
  • On the CREDIT side; there is a decrease in asset. (An asset is something of value).

  • On the DEBIT side; there is a decrease in income.
  • On the CREDIT side; there is an increase in income.

  • On the DEBIT side; there is a decrease in liability.
  • On the CREDIT side; there is an increase in liability. (Liability is an amount or resources owed).

  • On the DEBIT side; there is a decrease in equity.
  • On the CREDIT side; there is an increase in equity.

Please read on the Advantages and Limitations of the Double Entry System here.


The above characteristics of the Debit and Credit sides of an account are summarized in the image below:
Principle of Double Entry (Debit and Credit Sides) - Len Academy

Please read on the Concept and Types of Cost here.

 

Below are the characteristics or fundamental principles of Double Entry System:

  1. Two parties are required. They are the giver and the receiver. The party the gives out (money) is credited while that which receives the money is debited.

  2. There are two sides of the account; (Duality of Account). These are the Debit and Credit sides.

  3. The exchange is equal in amount. This implies that the amount of money given is equal to the amount of money received in any transaction.

  4. The sum or totality of the debit is equal to the totality of credit. To this end, there's always an equal result on both sides of the account.

  5. It is a scientific and complete accounting system.

You can read on Journals, Its Contents, Formats, Characteristics and Advantages here.

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len

Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.


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Amazing facts in Accounts

It is believed that Bookkeeping is the only English word to contain three sets of double letters repeatedly.

please read our article on bookkeeping vs Accounting here


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