How To Do a Double entry Bookkeeping Like A Pro

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  • 1. How-To Do a Double-entry Bookkeeping like a Pro. One of the time-consuming aspects in running a small business is recording the receipts. So, how do you effectively record your receipts, vouchers, billing statements and other documents produced by your business transactions? Every business transaction has a dual effect that is why a double-entry bookkeeping method is an effective tool to record transactions. The only things that you should remember on this method are the T-account, Debit and Credit, Asset Account, Liability and Owner’s equity accounts. T-Account The T account is so called because of its T-shape. It is used to show the increase and decrease in an item caused by a transaction. The T account is a convenient tool to analyze and record every transaction in a particular account. Account Title______ Debit Credit Rules on Debit and Credit Debits and credits are used to record the increases and decreases in each account affected by the dual effect in each transaction. In the T account, debit (DR) is on the left side and credit (CR) is on the right side. Now, you might be asking on how do you record each transaction in terms of debits and credits? Remember that all assets will be on the DR side and the liabilities + owner’s equity are on the CR side. Account Title______ Assets Liabilities + Owner’s equity Further, when adding and subtracting by position you must add on the same side and subtract on the opposite side. Rules for Asset Account 1. Adding (increase) of asset on the debit side 2. Subtracting (decrease) of asset on the credit side 3. The normal balance for an asset account is a debit balance
  • 2. Asset Accounts_____ Debit Credit Increase + Decrease - Balance Balance Rules for Liability and Owner’s Equity 1. Adding (increase) is on the credit side 2. Subtracting (decrease) on the debit side 3. The normal balance is called a credit balance Provide more space for Cash Accounts because there are more transactions that affect this account. Also, balances are determined by getting the difference between the debit totals and credit totals. Lastly, the balances are the amounts that will be used in the trial balance. Key Take-away:  Double-entry Bookkeeping method is a convenient tool to analyze and record transactions.  Each transaction has a dual-effect  All assets increase are recorded on the Debit side  All liabilities and owner’s equity are recorded on the Credit side.  The balances will be used in the trial balance. Your turn, how will the double-entry bookkeeping method help you in your business? Do you have other best practices in recording receipts?