Hi everyone! I am an Indian commerce student and I have a doubt regarding the double entry system in accounting. Can someone please explain how it works and why it is important? Thank you!
The double entry system is a method of bookkeeping where every transaction has two equal and opposite effects. It follows the principle of “debit what comes in, credit what goes out.” This system ensures accuracy and helps in maintaining the financial records of a business.
In simple terms, the double entry system helps in maintaining a balance between the assets, liabilities, and equity of a business. Without it, it would be difficult to track and analyze the financial performance of a company.
Make sure to always remember the golden rule of the double entry system: for every debit, there must be an equal and opposite credit. This helps in maintaining the balance sheet of a company and ensures that the books are accurate. -l3
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