Double Entry Bookkeeping System is a system for recording financial transactions (accounting) in which every financial transaction or any change recorded on two sides of the account is identified on one side as a debit, and the other side of the transaction is called a credit.
Double-entry bookkeeping system consists of information about the state and movement of assets and liabilities, costs and revenues, and economic result The economic phenomena that occurs in the reporting enterprise is the subject of double entry bookkeeping. Double entry bookkeeping is mandated in the relevant state law and accounting standards.
Basic characteristics of double-entry bookkeeping is a balancing principle or the principle of duality. The main idea of this principle is the equality of assets (in terms of category) and liabilities (funding sources) in the balance sheet. Therefore, any change of assets of the enterprise must be recorded twice, in connection with a double view on one fact, but equality must be kept between assets and liabilities.
What is Double Entry Bookkeeping for?
It provides relevant information about the state of the enterprise, enables control of the operations and it is used for assessment of tax liability in the tax return.
Accounting in the enterprise is processed by:
- An employee - accountant
- Firm hired through outsourcing