Double entry book-keeping – A

Double-entry bookkeeping

The process of making a debit entry and a credit entry for each transaction.

Ledger accounts

Separate accounts used to record transactions for each type of asset, expense, liability, income, debtor, and creditor.

Drawings

Any value taken from the business by the owner for personal use.

Balance

The difference between the debit side and the credit side of a ledger account.

Balancing ledger accounts

The process of finding the difference between the two sides of an account and recording the balance.

Purchases

Goods purchased for cash or cheque, recorded by debiting the purchases account and crediting the cash or bank account.

Sales

Goods sold for cash or cheque, recorded by crediting the sales account and debiting the cash or bank account.

Returns

Goods returned to the supplier (purchases returns) or returned by a customer (sales returns).

Carriage inwards

The cost of bringing goods to the business, recorded by debiting the carriage inwards account and crediting the cash or bank account.

Carriage outwards

The cost of delivering goods to the customer, recorded by crediting the carriage outwards account and debiting the cash or bank account.

Three-column running balance accounts

A ledger account format that includes three money columns for debit, credit, and balance after each transaction.

Interpreting ledger accounts and their balances

Understanding and explaining the entries made in a ledger account.