Glossary
What is double-entry bookkeeping?
Every rupee comes from somewhere and goes somewhere. Recording both sides is what makes the books check themselves.
Updated
In short
Double-entry bookkeeping records every transaction in at least two accounts, with total debits equal to total credits. In SimpleERP the database itself refuses any journal entry whose debits and credits do not match.
Double-entry bookkeeping records every transaction in at least two accounts, with total debits equal to total credits. A credit sale, for example, increases what the customer owes and increases sales. Because both sides must balance, many errors show up immediately, and the trial balance, profit and loss statement and balance sheet can all be built from the same set of entries.
Double-entry bookkeeping: a worked example
Two transactions at Lakshmi Steel Furnitures, each recorded on both sides:
| Account | Debit | Credit |
|---|---|---|
| Accounts receivable: Sri Murugan Traders | ₹21,830 | |
| Sales | ₹18,500 | |
| Output CGST 9% | ₹1,665 | |
| Output SGST 9% | ₹1,665 |
| Account | Debit | Credit |
|---|---|---|
| Bank | ₹21,830 | |
| Accounts receivable: Sri Murugan Traders | ₹21,830 |
Each entry balances on its own, so the books as a whole balance too.
FAQ
Questions, answered
What are the basic debit and credit rules?
Debits increase assets and expenses; credits increase liabilities, equity and income. So cash received is a debit to bank, and a sale is a credit to sales. The traditional Indian rules of personal, real and nominal accounts reach the same result by a different route.
Does double entry stop all mistakes?
Double entry does not stop all mistakes. It catches one-sided and unequal entries. It does not catch a correct-looking entry to the wrong account or a wrong amount on both sides. That is why invoices that post their own entries, and a review of the ledger, still matter.
Is double entry required for small businesses in India?
Businesses that must maintain books under the Income-tax Act or the Companies Act are expected to keep proper books of account, which in practice means double entry. It is also the only way to produce a balance sheet a bank will accept.
Do I need to know debits and credits to use accounting software?
Not for daily work, if documents post their own entries. You raise invoices, bills and payments, and the journals are written for you. Knowing the basics helps when you read reports or make an occasional manual journal.
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