9706 · 1.2.1
The accounting system
Understand the complete accounting process, from source documents to financial statements. This lesson covers the core principles of double-entry bookkeeping (DEAD CLIC), the function of books of prime entry (day books), posting to ledgers, and the overall accounting cycle.
Need to know
What you need to know
- Every transaction affects two accounts.
- For every debit entry, there must be a corresponding credit entry.
- The accounting equation (A = C + L) must always remain in balance.
- Use DEAD CLIC to remember the rules: Debit - Expenses, Assets, Drawings; Credit - Liabilities, Income, Capital.
Explanation
The accounting system
- Every transaction affects two accounts.
- For every debit entry, there must be a corresponding credit entry.
- The accounting equation (A = C + L) must always remain in balance.
- Use DEAD CLIC to remember the rules: Debit - Expenses, Assets, Drawings; Credit - Liabilities, Income, Capital.