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Double Entry System

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Double entry System

Look at an example:
You own a business, for example, selling shoes.
When you buy shoes from manufacturer: Transaction is your stock increase because new stock comes in. You pay for that stock and thus your cash reduces.
What does it mean? Two entries
Stock increases
Cash decreases

This system is known as Double entry system of book-keeping because for every transaction there are two entries.
In this system all transactions are entered in a set of accounts.
An account is a place where all the information referring to a particular asset or liability or to capital is entered.

Thus there is an account for everything in the business e.g. machinery, furniture, creditors, debtors and even capital.

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