Double entry book-keeping Cambridge IGCSE Accounting revision
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In plain words
Every transaction has two effects. Buy a van by cheque and you gain a van and lose money from the bank. Double entry records both: one account is debited and another is credited, with the same amount.
Each account is a page with two sides. The left side is the debit side and the right side is the credit side.
6 things to know
- Every transaction is entered twice: as a debit in one account and as a credit in another, for the same amount.
- Debit an account to record an increase in an asset, an expense or drawings.
- Credit an account to record an increase in a liability, income or owner's equity (capital).
- Decreases go on the opposite side: a fall in an asset is a credit, and a fall in a liability is a debit.
- In each account, the details column names the other account in the double entry.
- Goods bought for resale are debited to the purchases account, and goods sold are credited to the sales account. Other things the business buys to keep, such as a van, go in an asset account of their own.
Worked example
Give the double entry for each: the owner pays $10 000 into the business bank account; goods for resale costing $800 are bought on credit from Lee; rent of $300 is paid from the bank.
- Capital introduced: debit bank $10 000 (an asset rises), credit capital $10 000 (owner's equity rises).
- Goods on credit: debit purchases $800 (an expense), credit Lee $800 (a liability to a supplier).
- Rent paid: debit rent $300 (an expense), credit bank $300 (an asset falls).
Tips and tricks
- Ask two questions of every transaction. Which account receives the value? Debit it. Which account gives the value? Credit it.
- Goods for resale never go in an "inventory" account during the year. Purchases, sales and the two returns accounts are used.
It lands in your notebook with its questions as flashcards.
Double entry book-keeping: 6 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
On which side of an account is an increase in an asset recorded?
Assets, expenses and drawings increase on the debit side.
On which side of an account is an increase in a liability recorded?
Liabilities, income and capital increase on the credit side.
Goods are sold on credit to Mia. Which account is credited?
Mia's account is debited, because she now owes the business.
A business pays wages by bank transfer. Which entries are made?
An expense rises (debit) and an asset falls (credit).
Goods are bought for resale on credit from Tan. Which account is debited?
Tan's account is credited: the business owes him.
What does the details column of a ledger account show?
It lets you trace the other half of each entry.
Quiz
6 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 6 marks. Write your answers on paper, then check them.
Double entry book-keeping
Cambridge IGCSE Accounting 0452 · 6 marks · papermunch.org
Name ______________________________ Date ______________
State the double entry to record goods sold on credit to Ali for $650.[2]
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Debit Ali $650. Credit sales $650.
State the double entry to record the owner taking $120 cash for personal use.[2]
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Debit drawings $120. Credit cash $120.
A business buys a computer for $900, paying by bank transfer. State the double entry.[2]
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Debit computer equipment $900. Credit bank $900.
Answers: Double entry book-keeping
- 1. Debit Ali $650. Credit sales $650.
- 2. Debit drawings $120. Credit cash $120.
- 3. Debit computer equipment $900. Credit bank $900.