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Describe the Double Entry System.

Describe the Double Entry System.

Answers

Accounting equation forms the basis of the double entry system. Change in a business involving Assets, Liabilities or Capital MUST have an effect that is interrelated to the three components of the accounting equation. This is known as a double effect such that assets will always be equal to liabilities plus capital. For Example if the owners of a business enterprise put in additional capital into the business via bank, this will increase the cash at bank and the capital amount will also increase hence the equation is still maintained.
According to the accounting equation if all assets are represented by liabilities and capital then all debit entries should be the same as credit entries.

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Kavungya answered the question on August 17, 2021 at 07:24

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