For most companies, financial statement summarize hundreds of trans- actions in which the company has engaged. Bookkeeping records these transactions, summarizes them, and provides the figures that can be transferred to the financial statements. Double Entry Double entry is a means to record business transactions. Double entry ensures that the books will always be in balance. In accounting, for every event there is an equal and opposite event.
All business events are an exchange of one thing for another.
The terms debits and credits are used to record an event. The debit and credit refer to the increase or decrease created by the trans- action. It is important to know what to debit and what to credit. Determining whether to debit or credit an entry depends upon the nature of the account, and whether the event which is to be recorded will increase or decrease that amount. The following schedule shows the different types of accounts and the effect a debit or credit has upon the account.