Double Entry Model

Double Entry Rules and T Accounts

The Double Entry Rule

Every transaction has an equal and opposite effect on the accounting records:

• One account is debited (DR)
• Another account is credited (CR)
• The debit amount always equals the credit amount

DEADCLIC

A useful mnemonic for remembering which side increases:

DR = Drawings Expenditure Assets — CR = Liabilities Income Capital

Worked Examples

The T Account

Each ledger account has a T-shape: debit (DR) on the left, credit (CR) on the right. Each entry records: date, detail (the corresponding account), and amount.

           Account name
Dr                              Cr
Date  |  Detail    |  £  ||  Date  |  Detail    |  £

Balancing a T Account (5 Steps)

1. Add the amounts on the higher value side (DR or CR) — enter this total at the bottom of that column.
2. Copy this total to the bottom of the other column.
3. Add the amounts on the lower value side and find the difference from step 1.
4. Enter this difference on the lower value side, labelled:
   • Bal c/d — if the account is an asset, liability or capital account (carries forward to next period)
   • IS — if the account is an income or expenditure account (closed off to the income statement)
5. Record the Bal b/d figure on the opposite side, below the closing totals — this is the opening balance for the next period.

Income and expenditure accounts do not carry a balance forward — they are reset to zero each period and the net figure transfers to the income statement.