DOUBLE ENTRY ACCOUNTING

The rules for debit and credit are design so that every transaction is recorded by equal dollar amount of debit and credit the reason for this equality lies in the relationship of the debit and credit rules to accounting equation.

ASSETS=LIABILITIES+OWNER EQUITY

According to the debit and credit rules that we have just described,increases in the left side of the assets equation are recorded by debits while increase in the right side liabilities and owner equity are recorded by credit.

This system is often called double entry accounting the phrase double entry refers to the need for both debit entries and credit entries equal amount to record every transaction.