Principles of double-entry bookkeeping in accounting and implementation process

The double-entry bookkeeping method is widely used in businesses, organizations, and agencies, helping the system collect, process, and provide scientific economic and financial information. In the article below, 1C Vietnam will introduce the principle of double bookkeeping and the simple implementation process.

1. What is double bookkeeping?

Double-entry bookkeeping is a method of recording the amount of an economic transaction arising into accounts according to the correct economic content and relationships between types of assets, capital sources and other accounting objects.

For example:

Business A deposits 700 cash into a bank account. This operation increases bank deposits and reduces cash. According to the principle of double-entry bookkeeping , an increase in assets is recorded as a Debit, and a decrease in assets is recorded as a Credit. Therefore, this transaction is recorded as follows:

Through the reciprocal relationship between accounts, the double-entry bookkeeping method reflects the entire fluctuation process of accounting objects, thereby helping managers grasp the financial and business situation of the enterprise. Karma.

Besides, the balance of the amount of money on both Debit and Credit sides in each journal entry and in each certain period is also the basis for checking the accuracy of book recording. For example, if the total debit amount of all accounts during the period is not equal to the total credit amount of all accounts, it means there is an error in the recording process.

Thus, double-entry bookkeeping is an important accounting method, helping to reflect and check the entire process of fluctuations in accounting objects. Thanks to that, businesses ensure accurate and honest financial reporting.

2. Principle of double bookkeeping

To ensure the accuracy and truthfulness of information, accountants need to comply with the following principles of double recording :

• Principle of recording Debit and Credit: When recording double entries, it is necessary to determine which account is recorded as Debit first and which account is credited later according to the principle of double entry of the economic operations arising.
• Balancing principle: The total amount recorded on the Debit side of accounts in the same clause must be equal to the total amount recorded on the Credit side.
• Principle of clause separation: A complex clause can be split into simple clauses, but simple clauses cannot be combined into a complex clause.

3. Double-entry bookkeeping process in accounting

This is an important process in accounting, helping to determine the correct account and amount to record for each economic transaction that arises. Below are detailed 4 steps accountants need to take to effectively and accurately double-entry accounting:

3.1. Determine the economic operations arising

Determining which economic transactions affect which accounting objects is the first important step in the accounting process. This step is to identify accounts affected by arising economic transactions, thereby determining Debit and Credit for that account. At the same time, accountants need to analyze the content and nature of that transaction.

3.2. Identify affected accounts

Once a transaction has been identified, the next step is to identify the accounting accounts affected by that transaction. For example, if the transaction is a sale, the accounts that will be affected may include revenue, accounts receivable, and cost of goods sold.

3.3. Identify debits and credits

Every accounting transaction must have at least one debit and one credit. Debit notes are usually recorded on the left side of the account, while credits are recorded on the right side. In particular, debit and credit amounts must be equal in value to ensure that the accounting equation is preserved.

3.4. Determine the fluctuations of each object

This is an important step in the accounting process. This step helps accountants determine the fluctuating value of each accounting object related to the arising economic operations, thereby recording it in the account accurately and completely.

Thus, mastering the principles of double-entry bookkeeping and implementation procedures is a mandatory requirement for accountants. This helps accountants accurately and promptly record arising economic transactions, serving the preparation of financial reports and providing information to managers. If you want to optimize the accounting management process, businesses should combine the use of some smart software, typically 1C:Company Management. The software stands out with its financial management features, allowing you to set up multiple cash funds, bank accounts, track loans and debts, and automatically calculate amounts in the business each period. For more details, please contact Hotline: (+84)247 108 8887 for advice.