Debits & Credits
Double Entry Accounting SystemWhy Use Such a Complicated & Difficult Accounting System?
Any accounting system has two main functions: recording and checking.
![Lesson-1-Animation-1](https://seeaccountingnow.online/wp-content/uploads/2021/02/Lesson-1-Animation-1.gif)
At first, most of us focus on the recording function only and ask why we can’t we just use a simple recording system.
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The Problem with a Simple Recording System
Suppose you were keeping the accounting records for a retail store that had just opened.
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You could attempt to keep those records by simply recording the business’s sales and costs.
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The problem is a business may make many transactions during an accounting period.
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While it is easy to record transactions with a simple system, it is very difficult to check them reliably.
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If only some of these transactions are incorrect, your period-end accounting records will be unreliable and totally useless.
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The Double Entry Accounting System
To overcome this problem, businesses use the double-entry accounting system.
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This system wasn’t designed to make recording simple.
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Instead, it was designed with checking in mind.
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System Overview
With the double-entry system, you still record sales and costs.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/dc9.jpg)
But by using a double entry, you record a duplicate record of those transactions in other accounts, as well.
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This duplicate record is in a convenient format for checking.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/dc11.jpg)
It allows for fast, easy, and reliable checking against the records of other businesses.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/dc12.jpg)
By checking these accounts alone, you can make sure your entire record of sales and costs is correct.
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/dc13.jpg)
Accounts
Making all this possible is a system of two-sided accounts.
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Each account is divided into two sides.
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One sides is the credit side.
![dc16](https://seeaccountingnow.online/wp-content/uploads/2020/06/dc16.jpg)
You use this side to show money or value came from the account.
![dc17](https://seeaccountingnow.online/wp-content/uploads/2020/06/dc17.jpg)
The other side is the debit side.
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You use this side of the account to show what the money was used for or where it went
![](https://seeaccountingnow.online/wp-content/uploads/2020/04/dc19.jpg)
Lesson 2 shows how debits and credits work with cash transactions
© R.J. (Bob) Hickman 2020