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Double Entry System

Every transaction has two sides.

The Concept

For every DEBIT, there's a CREDIT.

Like: You can't clap with one hand!

Rules

  • Assets increase: Debit, decrease: Credit
  • Liabilities increase: Credit, decrease: Debit
  • Expenses: Debit
  • Revenue: Credit

Example

Transaction: Bought inventory for ₹50,000 cash

Analysis:

  1. Inventory (Asset) increased → Debit ₹50K
  2. Cash (Asset) decreased → Credit ₹50K

Journal Entry:

Inventory Dr.     50,000
  To Cash Cr.             50,000

Why Double Entry?

  • Self-balancing: Debits always = Credits
  • Error detection: If not balanced, mistake exists
  • Complete picture: See both effects

💡 Remember

DEALERS mnemonic:

Debit: Expenses, Assets, Losses

Credit: Revenue, Liabilities, Equity

Quiz

Test Your Knowledge

Test Your Knowledge

Question 1 of 1

1. What is the main concept covered in this lesson?

Double Entry System
Something unrelated
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Key Takeaway: Understanding Double Entry System is essential for making informed financial decisions.

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