Explained
Every entry answers four questions: when, how much, against which accounts, and on what document. An entry whose sides do not match is refused, and an entry found to be wrong is corrected by a reversing entry rather than deleted — the books are a record of what happened, and what happened is not erased.
Example
Paying 5,000 rent in cash: debit rent expense 5,000, credit cash 5,000.
Related terms
- Double-entry bookkeepingDouble-entry bookkeeping records every financial effect in at least two accounts — a debit and a credit of the same amount.
- General ledgerThe general ledger collects every posted movement for each account, and gives the balance of any account at any date.
- Reversing entryA reversing entry cancels the effect of an earlier entry by recording the same lines the other way round, instead of deleting the original.