Double-Entry Book Keeping

Abstract

For the past 500 years a system called ‘double entry’ has been in operation. All modern accounts use this system. It recognises that each transaction has two aspects. Let’s start at the beginning of a business. At the outset of a business the proprietor introduces cash (say £1,000). The business now has an ASSET (the £1,000 cash); and the proprietor has introduced CAPITAL (of £1,000). The two are equal. Thus we can say: Suppose now that £600 of the cash is used to buy a van. The business now has two assets. One asset has decreased; cash decreases to £400. Another asset increases; the van is worth £600. The equation still stands.