Ie to say that every transaction that is to be recorded in the book of account, should be recorded twice. An account is opened for both the giver and receiver of value . the accounts that receives value is debited while the accounts that gives out value is credited. i.e debit the
receiver, and credit the giver with the value of the transactions involved. In applying the double entry principle, the following procedural steps must be followed:
1. analyze the transaction and identify the two accounts involved
2. write up the account by identifying the receiver of value with the amount received and crediting the giver of value with the value given up ie debit the receiver and credit the giver
Examples
1. a trader buyers goods for resale and paid cash
account involved: purchases ac (receiver of value ) and cash account (given to value)
action required: debit purchases account in the ledger credit cash account
2. a trader buys goods from Ndife Blessing on credit . Account involved: Purchases account (receiver of value) and Ndife Blessings account (giver of value) action required: debit purchases account, credit ndife blessings account
3. a trader sells goods for cash
Action Involved: Sales account (giver of value and cash account (receiver of value )
Action Required: Debit cash account (cash book) and credit sales account in the ledger
4. A businessman pays for advertising in cash.
Action involved: advertising account (receiver of value ) and cash account (giver of value)
Action required: debit advertising account and credit cash account
In general: Assets are debited and liabilities credited
– loses are debited and profit credited
– expenses a debited and income credited.
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