Double Entry System

Double Entry is an old but yet a very important concept in accounting. It basically means that every financial transaction which takes place in the company will be recorded in at least two of the accounts in the accounting system.

Listing all kind of accounts that a company may need will result in a chart of accounts. The chart of accounts consists of all the accounts a company may find them useful for reporting transactions.

The number of accounts in the chart of accounts can be increased when the company grow bigger. Some accounts may be deleted if the owner of the company is not frequently using it.

The following are samples of the accounts that can be found in the chart of accounts of balance sheet and income statement:

Balance Sheet accounts:
* Asset accounts (Examples: Cash, Accounts Receivable, Supplies, and Equipment)
* Liability accounts (Examples: Notes Payable, Accounts Payable, and Wages Payable)
* Stockholders' Equity accounts (Examples: Common Stock, Retained Earnings)

Income Statement accounts:
* Revenue accounts (Examples: Service Revenues, Investment Revenues)
* Expense accounts (Examples: Wages Expense, Rent Expense, and Depreciation Expense)