Asset is a resource that owned or controlled by a company and will
provide a benefit in current and future periods for the business.
A liability is something a company owes, usually a sum of money.
Liabilities are settled over time through the transfer of money, goods, or services.
Owner’s equity is the total value of a company’s assets that belong to an
owner once the liabilities have been settled
Revenue is money your business receives
from its normal business activities
Expense is money you spend to run your
The Rules :
The double entry system is the basis of accounting recording system which need every
business transaction to be recorded into two accounts (or more)
One account will have an amount entered as a debit and the other one account will
have an amount entered as a credit.
Further, the total amounts entered as debits must be equal to the total amounts
entered as credits.
Meeting these requirements will result in the accounting equation (Assets = Liabilities +
Owner’s Equity) being in balance at all times.
Left Side Right Side
Debit Side Credit Side
The effect of accounting entries
• Increase in assets • Decrease in assets
• Increase in expense • Decrease in expense
• Decrease in liability • Increase in liability
• Decrease in equity • Increase in equity
• Decrease in income • Increase in income
Assets Account Liabilities Account Equity Account
Debit Credit Debit Credit Debit Credit
+ - - + - +
Example Of Double Entry
1. Purchase of machine by cash
Debit Machine Increase in asset
DCEaBsIhT DecreaCsRe DinITasset
2. Payment of utility bills Increase in expenses
Decrease in asset
Debit Utility Expenses
3. Intereset received on bank deposit account
Debit Cash Increase in asset
Credit Finance Income Decrease in asset
What is ledger?
A ledger is a book containing accounts in which the
classified and summarized information from the journals is
posted as debits and credits.
It is also called the second book of entry.
Ledger has two sides, the debit (Dr) and the credit (Cr).
The left hand side is the debit side while the right hand side
is the credit side.
Ledger can be devided into 2 types categories that is
subsidiary ledger and general ledger.