Accounting integrates and interprets the information gathered through bookkeeping. Regardless of the tracking you do, all businesses need to follow the money. The double entry system is one of the most trustworthy systems. To put it simply, double entry bookkeeping means that every transaction is entered in two accounts. We debit one account and credit another. It keeps your books balanced. Double Entry Book Keeping Examples would explain this better for students and beginners. It indicates how currency flows from account to account. When you purchase goods for cash, you decrease cash and increase goods. The bank by giving you a loan increases, at the same time your liability increases. You can record these simple actions using the double entry method.
In this article, we will define double entry bookkeeping example, explains how double entry accounting works, and give real bookkeeping examples double entry. We will also provide basic double entry bookkeeping examples, double entry bookkeeping example questions, and detail how to enter records using double entry bookkeeping examples excel.
What is the Double Entry Bookkeeping?
Double entry accounting is a type of accounting system in which each business transaction is recorded in two accounts. Digging a Little Deeper: Two Accounts are affected A credit entry is made on the other account. This maintains an intact accounting equation. The accounting equation is:
Assets = Liabilities + Capital
In double entry, this equation is always true. When you purchase a machine in cash, your asset (machine) will go up but cash (another asset) goes down. When you take a loan, your bank balance goes up, but so do your liabilities.
This system originated in Italy over 500 years ago. This method is used by every big or small business today. It maintains accurate records and minimizes errors.
Why is it called a Double Entry?
Every transactional event concerns two accounts, which is why it is referred to as double entry. You debit one, credit another. That ensures all books are right and are aligned. You can’t record only one siding. Both sides must be written.
Key points:
- Translation: Debit = money in/asset up
- The credit is an outflow of cash or increase in liability.
- Each entry must impact two sides.
- It also keeps records balanced and easy to follow.
Benefits of Double Entry
There are a number of advantages that the double entry system offers businesses. It is the most reliable method for doing accounts. It tracks all money being provided and makes an audit easy.
Easy to Track Transactions
Every entry is clear in double entry system. It tells how much money came in and went out. It makes finding errors easier.
Accurate Financial Reports
When your profit and loss account and balance sheet are always correct when using this system. Anytime you know your business health.
Helps in Decision-making
You can see what you make, what you owe and what you own. It allows you to prepare for what lies ahead.
Avoid Frauds
Because every rupee is recorded in two accounts, there is little room for cheating or hiding transactions. It introduces a system of truth and control.
Meet Legal Needs
Laws demand accurate accounts in India and elsewhere. It assists to comply with GST, Income Tax and audit laws.
Now lets jump into some real basic double entry bookkeeping examples.
Double Entry Bookkeeping Examples
Double entry examples are the first steps students and aspiring accountants can take to understanding financial accounting.Simple double entry examples that are real-life driven to understand recording and accounting for financial transactions accurately are:
Example 1: Started business with cash
You have ₹50,000 in cash and you start a business.
| Account | Debit (₹) | Credit (₹) |
| Cash A/c | 50,000 | |
| Capital A/c | 50,000 |
- Cash Received, Debit Cash A/c.
- Capital A/c is credited as Owner’s capital increases.
Example 2: Purchased assets for cash ₹10,000
| Account | Debit (₹) | Credit (₹) |
| Furniture A/c | 10,000 | |
| Cash A/c | 10,000 |
- You receive Furniture (Asset), hence debit to Furniture A/c.
- Credit Cash A/c because you make payment in cash.
Example 3: Goods purchased by the credit from Mohan of ₹5,000
| Account | Debit (₹) | Credit (₹) |
| Purchases A/c | 5,000 | |
| Mohan’s A/c | 5,000 |
- Debit Purchases A/c: Goods purchased (expense)
- So credit Mohan’s account, you owe him.
Example 4: Sale of goods for cash ₹3,000
| Account | Debit (₹) | Credit (₹) |
| Cash A/c | 3,000 | |
| Sales A/c | 3,000 |
- Whenever Cash received Debit Cash A/c.
- It is your income, so credit Sales A/c.
Double Entry Bookkeeping System Example
First, let us take a sample of business transactions in a month. We shall write down double entry for each of them. As such, double entry bookkeeping example questions can be useful for students to practice.
Business: Rohan Traders
Transactions for April:
- Begun affairs with ₹1,00,000 cash
- Purchased goods in credit from Raj Traders ₹40,000
- Received payment in cash for the goods sold to Aman ₹25,000
- Paid Raj Traders ₹20,000
- Paid rent ₹5,000
- Received commission ₹2,000
Now, the entries:
| Date | Transaction | Debit | Credit |
| 1st April | Cash A/c Dr. ₹1,00,000 | Capital A/c Cr. ₹1,00,000 | |
| 3rd April | Purchases A/c Dr. ₹40,000 | Raj Traders A/c Cr. ₹40,000 | |
| 5th April | Cash A/c Dr. ₹25,000 | Sales A/c Cr. ₹25,000 | |
| 7th April | Raj Traders A/c Dr. ₹20,000 | Cash A/c Cr. ₹20,000 | |
| 10th April | Rent A/c Dr. ₹5,000 | Cash A/c Cr. ₹5,000 | |
| 15th April | Cash A/c Dr. ₹2,000 | Commission A/c Cr. ₹2,000 |
You can also do this in a double entry bookkeeping examples Excel. That does a good job of keeping clean records.
Practice Example Questions for Double Entry Bookkeeping
Try out these double entry bookkeeping example questions now. These assist in testing your knowledge.
Question 1
Now paid ₹20,000 for a machine, paid via bank.
Answer:
| Machinery A/c Dr. ₹20,000 |
| To Bank A/c Cr. ₹20,000 |
Question 2
Sold goods to Suresh for ₹15,000 cash, received ₹10,000.
Answer:
| Cash A/c Dr. ₹10,000 |
| Suresh A/c Dr. ₹5,000 |
| To Sales A/c Cr. ₹15,000 |
Question 3
Paid salary ₹8,000
Answer:
| Salary A/c Dr. ₹8,000 |
| To Cash A/c Cr. ₹8,000 |
This kind of practice helps to master the bookkeeping double entry format.
How to Use Double Entry Bookkeeping Examples Excel?
Excel practice is a common workaround for many students. It helps in developing logic, and speed. So, here is how you can use double entry bookkeeping examples excel:
Columns: Date, Particulars, Debit, Credit
Formulas to Display Debit = Credit Check
Create separate sheets for each month
Use AutoSum to tally totals
Excel is also useful for exam prep and business work. It is fast and easy to use.
Relevance to ACCA Syllabus
Students must be familiar with the double entry bookkeeping system and able to prepare ledgers, journals, trial balances, and final accounts as per the accounting standards for the financial accounting (FA) and financial reporting (FR) papers in the ACCA qualification. The first things you will cover are these double entry bookkeeping examples and these are going to be the foundation for everything else you learn in ACCA.
Double Entry Bookkeeping Examples ACCA Questions
Q1. What will be the correct entry for the business receiving Cash ₹25000 as capital from the owner?
A. Debit Capital, Credit Cash
B. Debit Cash, Credit Capital
C. Capital Account with a debit, Sals, a credit
D. Debit Sales, Credit Cash
Answer: B. Debit Cash, Credit Capital
Q2. On credit, a company buys inventory valued at ₹10,000. Which entry is correct?
A. Purchase is a debit and credit to a bank
B. Debit Purchases, Credit Creditors
C. Debit Inventory, Credit Sales
D. Debit Expenses, Credit Inventory
Ans: B. Debit Purchases, Credit Creditors
Q3. Double entry if a company is paying ₹15,000 as cash salaries.
A. Debit Wages, Credit Equity
B. Debit salaries, credit cash
c. Debit Cash and Credit Salaries
D. Debit Salaries and Credit the Bank loan
Answer: B. Debit Salaries to decrease expense, Credit Cash to decrease asset.
Q4. What will be the double entry for the receipt of ₹8,000 by cash from a debtor?
A. Debit Cash, Credit Debtor
B. Debit Debtor, Credit Cash
C. Debit Sales, Credit Debtor
D. Debit Cash, Credit Sales
Answer: A. Debit Cash, Credit Debtor
Q5. If a journal debits Equipment and credits Cash.
A. Equipment goes down: Cash goes up
B. Equipment goes up, cash goes down
C. Increase in equipment, increase in revenue
D. Equipment is reduced; Liabilities are increased
Answer: B. Cash decreases, equipment increases
Relevance to US CMA Syllabus
Part 1: Financial Reporting, Planning, Performance, and Control of US CMA syllabus includes basic accounting principles like double entry. This will help candidates become familiar with cost control, budgeting and internal accounting processes — using double entry bookkeeping as examples.
Double Entry Bookkeeping Examples US CMA Questions
Q1. This entry shows payment of ₹5,000 office rent by cheque.
A. Debit Rent, Credit Cheque
B. Debit Cash, Credit Rent
C. Debit Rent, Credit Bank
D. Debit Capital, Credit Rent
Answer: C Debit Rent Credit Bank
Q2. You earn ₹10,000 commission income in cash. What is the correct entry?
A. Debit Commission, Credit Cash
B. Debit Commission, Credit Cash
C. Debit Revenue, Credit Commission
D. Debit Income, Credit Bank
Ans: C Debit Cash, Credit Commission
Q3. You buy office supplies on credit. What accounts are affected?
A. Supplies (Dr.), Accounts Payable (Cr.)
B. Debit Cash, Credit Supplies
C. Supplies (Debit), Bank (Credit)
D. Capital (Dr), Supplies (Cr)
Answer: A Supplies (Debit) — Accounts Payable (Credit)
Q4. Which of the following represents depreciation of ₹2,000 on equipment?
A. Debit Equipment, Credit Cash
B. Debit Equipment, Credit Depreciation Expense
C. Dr. Depreciation Expense Cr. Accumulated Depreciation
D. Debit Cash, Credit Depreciation
Answer: C. Debit Depreciation Expense; Credit Accumulated Depreciation
Q5. What journal entry should be passed for the withdrawal of ₹3,000 by the owner, for private uses?
Q. Debit Drawings, Credit Cash
B. Debit Capital, Credit Cash
C. Debit Cash; Credit Drawings
D. Debit Bank; Credit Drawings
Answer: A. Debit Drawings and Credit Cash
Relevance to US CPA Syllabus
As for the US CPA exam, conceptual and practical knowledge of double entry bookkeeping examples is inextricably linked to recording transactions under GAAP and preparing financial statements in the FAR (Financial Accounting and Reporting) section. Double entry is the foundation of journal entries, adjustments, and trial balances.
Double Entry Bookkeeping Examples US CPA Questions
Q1. Which entry, a record of sales made on credit worth ₹20,000?
A. Debit Sales, Credit Accounts Receivable
B. Debit Cash, Credit Sales
C. Debit Accounts Receivable, Credit Sales
D. Sales Debit, Capital Credit
Ans: C. Accounts Receivable debit, Sales credit
Q2. Following is the correct entry for receipt of ₹15,000 from the customer who owed him money:
A. Charge Revenue, Issue Customer
B. Debit Cash, Credit Accounts Receivable
C. Customer debited, bank credited
D. Debit Capital — Credit Debit Sales.
Answer: B. Debit Bank, Credit Accounts Receivable
Q3. What is the double entry for the business paying insurance in advance (₹2,500)?
A. Debit: Insurance Expense Credit: Bank
B. Debit Prepaid Insurance; Credit Bank
C. Prepaid Insurance DR / Capital CR
D. Debit Bank and Credit Insurance Expense
Answer: B. Prepaid Insurance DR, Bank CR
Q4. An amount of ₹1,00,000 is borrowed from a bank as a loan. What is the correct journal?
A. Debit Unsecured Loan Receivable, Credit Bank Q. Explain the?
B. Debit Loan Payable, Credit Bank
C. Debit Cash, Credit Interest
D. Debit Revenue, Credit Bank
Ans: B. Debit bank, Credit loan payable
Q5. Which of the following is double entry for depreciation expense?
A. Debit Equipment, Credit Cash
B. Debit Accumulated Depreciation, Credit Depreciation Expense
Debit Depreciation Expense, Credit Accumulated Depreciation.
D. Debit Depreciation Expense; Credit Equipment
Ans. C. Debit Depreciation Expense, Credit Accumulated Depreciation
Relevance to CFA Syllabus
Unlike the more analytical CFA, Level I – Financial Reporting and Analysis tests whether candidates comprehend the impact of transactions on financial statements. Examples of double entry bookkeeping knowledge allow an analyst to react appropriately to reported changes in assets, liabilities, and equity when evaluating company performance.
Double Entry Bookkeeping Examples CFA Questions
Q1. When a business repays a creditor ₹4,000, what happens?
A. Increases in Assets, Increases in Liabilities
B. Decrease in Assets, Increase in Liabilities
C. Liabilities and assets are decreasing.
D. Owe more money, worth less money.
Answer: C. Assets decrease, Liabilities decrease
Q2. What is the journal entry for an amount received in cash from the issue of share?
A. Debit Capital, Credit Cash
B. Debit Cash, Credit Capital
C. Debit Sales, Credit Cash
D. Debit the Bank Loan Account and Credit the Capital Account
Ans: A. Debit Cash, Credit Capital
Q3. Machinery depreciation amounts to:
A. Asset up, revenue down
B. Liability increases, expense increases
C. Decrease in asset, increase in expense
D. Decrease in expense increase in capital
Ans: C. Decrease in asset, Increase in expense
Q4. It’s where a customer pays in advance for services to be provided later. What is the correct entry?
A. Debit Revenue, Credit Cash
B. Debit Unearned Revenue, Credit Cash
C. Debit Cash, Credit Unearned Revenue
D. Debit Capital, Credit Income
Answer: C. Debit Cash, Credit Unearned Revenue
Q5. Let’s say inventory is acquired on cash basis, here is how it will appear in financial statements:
A. No change in total assets
B. Growth in assets and liabilities
C Decrease in assets and equity
D. Increase in revenue
Answer: A. Total assets do not change.
