# Principle of Double Entry explained

### Double Entry System:

Just as we have two sides to a coin, so also are there two sides to every transaction. For instance, in order to purchase a phone from a local store, you will need to pay some money to the store attendant before you can own the phone.

The above simple transaction has two sides from the perspective of the buyer (you) and the seller (store attendant). From the transaction, your money would have been decreased by the amount you paid for the phone while the seller would be short of a phone. Conversely, you will own a new phone while the seller’s cash balance would have increased by the amount you paid for the phone.

If both parties (the buyer and seller) were to take a record of the transaction, each record will have two sides.

##### Below is an illustration of the above transaction:

From the buyer's record (you); one half (called the debit side of the account) will reflect an increase in expense because you paid out money to own the phone while the other half (credit side of the account) will reflect an increase in asset because the phone becomes yours and you may use it for whatever purpose you wish. (The phone becomes an asset for the buyer).

From the seller’s record, one half (debit side of the account) will reflect an increase in labiality due to the resultant absence of the phone from its sale while the other half (credit side of the account) will reflect an increase in income because money was received from the sale of the phone.

Asset accounts are debited when they are increasing while Liability accounts are credited when they are increasing.

Expenses accounts are debited when they are increasing while Income accounts are credited when they are increasing.

Think of 'credit' as 'getting paid'. For instance, if your bank account is credited, that will imply that money has been paid into it.

Think of 'debit' as 'spending money'. For instance, whenever you purchase something, your account will be debited.

From the above explanations, a transaction involving two corresponding parties of account is termed Dual Entry of Transaction.

On the debit side (Dr) is the account receiving the benefit while that which gives the benefit appears on the credit side (Cr) of the account.

The process of keeping an account with a debit and credit side is referred to as the Double Entry System.

An accounting system that is based on this principle; 'that for every debit entry made, there must always be a corresponding credit entry' is known as the principle of double entry or duality principle. This principle ensures that whatever is present on the debit must equal that of the credit; that is: 'Debit = Credit'.

Without the concept of double entry, account records will only present or show a partial view.

Sometimes, the confusing aspect of writing a dual entry account is the uncertainly of what to write on the debit and credit sides. This should not be a problem because an understanding of the characteristics or features of debit and credit sides of accounts will aid you in this regard.

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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