Double entry accounting

Accounting involves the classification, analysis and dissemination of financial information to parties who require such information to make decisions and decisions based on the material.

Is the measurement and control of financial transactions that are, in essence, the transfer of legal property rights, between one party and another, made under the scheme. However, financial transactions that are not in nature are specifically excluded, as they are considered as not material.

The double-entry accounting system is the axis used by companies and organizations to register all their financial transactions. The concept was first introduced in 1494 by the Italian mathematician Luca Pacioli.

It is based on the proposition that a measure of a company’s financial well-being and a record of the results of its operations are best recorded by the use of accounts.

Therefore, each account of the historical record of changes in currency values related to different aspects of the business. The method first outlined by Pacioli is now called the double-entry accounting.

The basis of this system is simply that each transaction is recorded in at least two accounts. States on the assumption that every financial transaction, there is at least one account is debited at the same time, while at least one other account is credited. The result of this process is that the total debits of the transaction are equal to total credit to the net value is zero.

Consider the following scenario. Suppose Mr. A sells an article that Mr. B, Mr. A paid by check. The books work on behalf of Mr A, credit the account called “Sales” and debit the account called “Bank” (this would result in money flowing into the bank account). Moreover, the books work on behalf of Mr. B, the account called “Purchases” and credit the account called “Bank” (this would result in money flowing from the bank account).

It is the accepted principle that a debit will be added to the left and credit entries to the right side of the ledger account.

The general ledger, also known as the nominal ledger, is the main source for the recording of the records of a company that makes use of the dual process, taking into account that there is a single entry, that version is much more restrictive.

It has numerous accounts for such items as current assets, fixed assets, liabilities, income, expenses, gains and losses. The ledger accounts are established itself as T accounts, and to resemble the letter T when the account is empty.

It has been suggested that the double entry goes back further to the days of ancient Rome or Greece. Some critics of current accounting methods have suggested that the methodology has changed very little since this time, that would certainly indicate that the principles for hundreds of years is based on solid foundations.

Particularly relevant in this respect is the approach that emerged in the social, which holds that business entities should pay more than words to the social and environmental impacts caused by their activities.

It has been argued that accounting should not only be interested in the financial evaluation of economic developments, but should encompass a wider public, including shareholders and broaden its appeal beyond just the financial reporting of income .

Accounting – How to Succeed

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