Double entry in a digital world
• Why do bookkeepers who use computerised packages need to
understand the fundamentals of double entry bookkeeping?
• What this presentation covers
• Where to start
• Firstly forget the terms debit and credit, what they mean and how you
enter them into the accounts
• What does ‘double entry’ mean?
• Did money change hands?
Cash transactions
What types of transactions are we looking at?
• Anything we acquire or sell for which money is paid or received immediately
• Payment can be in actual cash, or through the bank (debit card)
• Purchases are items that you buy to resell
• Sales are items that you have previously bought and are now selling
• Expenses – rent, heating and lighting, wages of employees, telephone, travel, etc.
• Assets – things we buy that we are going to keep in the business – equipment, vans, computers
• Drawings – money taken out by the owner to live on
Rules of double entry
• Never one entry
• Never two entries on the same side
• Always the same amount
Cash purchases
• What came in – goods for resale
• What went out – money from the bank
Bank Account
Date Details In Out
Purchases Account
Cash purchases
• What came in – goods for resale
• What went out – money from the bank
Bank Account
Date Details In Out
5 April 2020 Purchase of goods by debit card 500.00
Purchases Account
Date Details In Out
Cash sales
• What came in – money for the sale
• What went out – goods from the business
Bank Account
Date Details In Out
5 April 2020 Purchase of goods by debit card 500.00
10 April 2020 Sale of goods by debit card 250.00
Sales Account
Date Details In Out
Other cash transactions
• Payment of a mobile telephone bill
Bank Account
Date Details In Out
5 April 2020 Purchase of goods by debit card 500.00
10 April 2020 Sale of goods by debit card 250.00
10 April 2020 Payment of mobile telephone bill 50.00
Telephone Account
Date Details In Out
Starting up the business
• Most businesses need capital
• Opening a bank account
Bank Account
Date Details In Out
1 April 2020 Start up capital paid in 1000.00
5 April 2020 Purchase of goods by debit card 500.00
10 April Sale of goods by debit card 250.00
10 April Payment of mobile telephone bill 50.00
Capital Account
Date Details In Out
Double entry rules revisited
• Extending this concept out you should be able now to understand any transaction that is made
directly through a bank account (or if the payment is actually in cash – say through a small till) then
look at the money side first and make the entry and then produce the ‘other half’ of the transaction.
• So, our double entry now becomes:
• In – goods or services received (and paid for), things we have received the benefit of or
money coming in
• Out – goods or services going out (under sales) and amounts owed to the owner (Capital)
• Accounts like the mobile telephone account are called expenses and can cover things like rent,
Credit purchases
Purchases Account
Date Details In Out Balance
5 April 2020 Purchase of goods on credit from Fred
500.00
Fred’s Account
Date Details In Out Balance
5 April 2020 Purchase of goods on credit 500.00
Fred’s Account
Date Details Cr Balance
Credit sales
Sales Account
Date Details In Out Balance
10 April 2020 Sale of goods on credit to Frederica 250.00
Frederica’s Account
Date Details In Out Balance
10 April 2020 Sale of goods on credit 250.00 250.00
Frederica’s Account
Date Details Dr Balance
Balancing accounts
Bank Account
Date Details Dr Cr Balance
1 April 2020 Start up capital paid in 1000.00 1000.00 Dr
5 April 2020 Purchase of goods by debit card 500.00 500.00 Dr
10 April 2020 Sale of goods 250.00 750.00 Dr
Other balances
Purchases Account
Date Details Dr Cr Balance
5 April 2020 Purchase of goods by debit
card 500.00 500.00 Dr
Sales Account
Date Details Dr Cr Balance
10 April 2020 Sale of goods paid by
debit card 250.00 250.00 Cr
Mobile Phone Account
Date Details Dr Cr Balance
10 April 2020 Payment of mobile phone by debit card
50.00
50.00 Dr
Capital Account
Date Details Dr Cr Balance
The Trial Balance
Account Dr Balances Cr balances
Bank Account 950.00 Purchases 500.00 Sales 250.00 Telephone 50.00 Capital 1000.00 Debtors 250.00 Creditors 500.00 Column Totals 1750.00 1750.00
Paying for credit transactions
Bank Account
Date Details Dr Cr Balance
1 April 2020 Start up capital paid in 1000.00 1000.00 Dr
10 April 2020 Payment of mobile phone by debit card 50.00 950.00 Dr
30 April 2020 Payment to Fred 500.00 450.00 Dr
30 April 2020 Receipt from Frederica 250.00 700.00 Dr
Fred’s Account
Date Details Cr Balance
5 April 2020 Purchase of goods on credit 500.00 500.00 Cr
30 April Payment from bank 500.00 0.00
Frederica’s Account
Date Details Dr Balance
10 April 2020 Sale of goods on credit 250.00 250.00 Dr
Final Trial Balance
Account Dr Cr Bank Account 700.00 Purchases 500.00 Sales 250.00 Telephone 50.00 Capital 1000.00 Column Totals 1250.00 1250.00Entry into the computerised system
-bank payments and receipts
Bank Account (payments)
Date Details Nominal Account Amount
1 April 2020 Purchase of goods by
debit card 500.00
Bank Account (payments)
Date Details Nominal Account Amount
1 April 2020 Purchase of goods by
debit card Purchases 500.00
Bank Account (receipts)
Date Details Nominal Account Amount
5 April 2020 Sale of goods paid by
Entry into the computerised system –
credit transactions
Fred’s Account
Date Details Nominal Account Amount
5 April 2020 Purchase of goods by debit
card Purchases 500.00
Frederica’s Account
Date Details Nominal Account Amount
10 April 2020 Sale of goods paid by debit
