Double entry bookkeeping involves making at least two equal entries for every transaction, with one entry recording a debit to one account and one recording a credit to another related account. Accounts represent a T-shaped balance sheet with debit and credit sides. For example, when reimbursing a collaborator's expenses, the credit entry is recorded in the bank account to show money decreasing, while the debit entry is recorded in the collaborator's account to show money increasing. Bookkeeping software like Bkper performs double entries for all transactions to keep debits and credits in balance.
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Bkper double entry accounts explained
1. How does double entry bookkeeping work?
Each time you make a transaction, like when you pay someone, you are
going to make at least two entries in two different accounts.
What is an account?
An account represents a T balance with a debit (left) and a credit (right) side.
Account
Credit (right)Debit (left)
2. What else?
Debit and Credit are always in balance in a book.
A booking always consist of a Debit and Credit entry in a book.
To start a book you make balance adjustments to your accounts.
Debit entries mean an increase on the account *
Credit entries mean a decrease on the account *
* reverses on credit accounts
Debit and Credit bookings are always in two different accounts.
3. A simple example
You pay a delivery with a bank transfer.
Bank
12 05 2015 4000 delivery.
This is a credit entry on your Bank account.
Expense
12 05 2015 4000 delivery.
And
A debit entry on your Expenses account.
4. How do you represent this with double entry bookkeeping?
Lets walk trough another example
Your Collaborator goes on a trip and makes some expenses and
at the end of the month the company reimburses these
expenses.
5. Collaborator
So the collaborator has a pizza for lunch and spends $ 50,00
Expense
The Credit entry to be recorded is the Collaborator spending (decreasing) its $ 50,00
The Debit entry to be recorded is the Expense increasing with $ 50,00
12 05 2015 50 pizza 12 05 2015 50 pizza
Example
6. Collaborator
The collaborator stays that night in a hotel for $ 250,00
Expense
The Credit entry to be recorded is the Collaborator spending (decreasing) its $ 250,00
The Debit entry to be Recorded is the Expense increasing with $ 250,00
12 05 2015 50 pizza 12 05 2015 50 pizza
12 05 2015 250 hotel 12 05 2015 250 hotel
Example
7. At the end of the month it is time to reimburse your Collaborator’s expenses.
Example
The reimbursement represents a bank payment to your collaborator of all his spendings.
The Credit entry to be recorded is the Bank account transfering (decreasing) $300,00
The Debit entry to be recorded is the reimbursement on the Collaborator account with $300,0
CollaboratorBank
12 05 2015 50 pizza
12 05 2015 250 hotel
31 05 2015 300 reimbursement. 31 05 2015 300 reimbursement.
8. How does bkper do this?
In the exact same way!
Bank
31 05 2015 300
reimbursement.
Collaborator
31 05 2015 300
reimbursement.
Expenses
12 05 2015 50
pizza
12 05 2015 250
hotel
12 05 2015 50
pizza
12 05 2015 250
hotel
9. How does bkper do this?
In the exact same way!
31 05 2015 reimbursement.
12 05 2015
12 05 2015
pizza
hotel
Collaborator
Expenses
Expenses
Bank
Collaborator
Collaborator
50
250
300
Credit Debit
10. And this is how it looks like in bkper
Accounts
Transactions
11. Choosing Your Accounts
Keep it simple
BankWork Expenses
02 05 2015 3000
Salary
12 05 2015 50
pizza
12 05 2015 250
maintenance
02 05 2015 3000
Salary
12 05 2015 50
pizza
12 05 2015 250
maintenance
With just a few accounts you can book everything
17. Continue building
Build in the complexity required for your situation.
Assets / equity
Cash
transport
Bank
lodge
food
Expenses
Service A
Product B
Client A
Employees
Employee
Collaborator
Suppliers
Provider
Supplier
Client B
Product A
Product B
Service A
Inventory
Customers
Sevices
Provider
Revenue
INCOME / RECEIVABLES ASSETS / EQUITY PAYABLES / EXPENSES