What is the System?

The system is a method of bookkeeping which records each transaction twice. This reflects the dual nature of each transaction as it affects the business.

The first entry records what comes into the business (a debit) and the second entry what goes out of the business (a credit).

Each transaction reflects the basic accounting equation which can be stated as:

Assets = Liabilities + Capital

If each entry is recorded correctly the books of account will balance. This method of double entry helps with the compilation of accounting data which enables a trial balance, profit and loss account and a balance sheet to be drawn up.

Invented in the 13th century by Italian merchants, is used worldwide. The principles were first set out in writing by the Italian monk (1445-1517) in the 1494 book ‘Summa de Arithmetica.’

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Return to the Glossary System February 8th, 2017Team

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