Double-entry bookkeeping and the chart of accounts
The principle of double entry, the direction of accounts, the classes of the French chart of accounts and the chain from journal to ledger to trial balance: recording an entry and knowing why it balances.
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Double entry: what is it?
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The principle that every transaction is recorded twice, by its source and its destination, with total debits equal to total credits.
A cash sale increases the bank balance (destination) and revenue (source). Since each entry balances, the books check themselves.
A company receives a 500 € bank transfer from a customer. Which entry is correct?
- Debit 512 Bank 500, credit 411 Customers 500
- Debit 411 Customers 500, credit 512 Bank 500
- Debit 512 Bank 500, credit 706 Service revenue 500
- Debit 512 Bank 500, debit 411 Customers 500
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Debit 512 Bank 500, credit 411 Customers 500
The bank balance grows (a use of funds, debited) and the customer's receivable is settled (credited). Revenue 706 was already recognised at invoicing: crediting it again would count it twice.
An account's balance is a … balance when its debit total exceeds its credit total, and a … balance otherwise.
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An account's balance is a debit balance when its debit total exceeds its credit total, and a credit balance otherwise.
An ordinary bank account has a debit balance; a suppliers account has a credit balance. A bank account with a credit balance means an overdraft.
Debit: what is it?
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The left-hand column of an account: it takes increases in uses of funds (assets, expenses) and decreases in sources of funds.
Debit does not mean “loss”: a bank balance that grows is debited. The word names a side, not a judgement.