It provides an overview of the financial situation of a company: on the left are the assets, on the right: liabilities and equity (which represents the amount of money that would be returned to a companyвЂ™s shareholders if all of the assets were liquidated and all of the company's debt was paid off). The basis of any double-entry accounting is a single account: the balance sheet.

The profit and loss account, which shows the profit or loss for the period, when expenses are subtracted from income/revenue.

The balance sheet, showing whether the companyвЂ™s assets have increased or decreased compared to the previous year.The general ledger contains the accounts to which these transactions are recorded.ДЄ third explanation of the term вЂњdouble-entry bookkeepingвЂќ indicates that there are two ways to measure a companyвЂ™s success вЂ“ through: Of course, the amount on the two sides must be the same.ДЄ second interpretation is based on the two books of which this bookkeeping essentially consists: The journal (or register) records business transactions in chronological order. This results from the standard form of a record: it is always valid and is вЂњ debit to credit.вЂќ A posting can also address several accounts on one side or the other. The opposite sides of the two accounts are always balanced. Only positive amounts are posted вЂ“ either left (debit) or right (credit). However, the concept of debit and credit also means that there are (in principle) no negative values in double-entry bookkeeping вЂ“ unlike on the account statement of your bank account, for example.

The term вЂњdouble-entry accountingвЂќ derives from the fact that this accounting method affects two separate accounts, as an account has two pages, a debit and credit side. in the event of insolvency) also the business partners, and the state вЂ“ usually represented by the tax office. These include, for example, the shareholders of the company, under certain circumstances (e.g. The third parties mentioned in the law are all those who might have a legitimate interest in the business transactions of the respective company. This means that accounting records the business transactions of an enterprise in numerical values вЂ“ and according to the principles of proper accounting, this should take place in a timely and factual manner and the transactions must be traceable, with documentation. These principles consist of legal regulations and informal rules and are intended to ensure that the accounts вЂњprovide an expert third party with an overview of the business transactions and the situation of the company within a reasonable period of time.вЂќ The business transactions must be accountable on both sides of the transaction. The words debit and credit are taken from accounts, or more precisely, from double entry accounts, as they are used in the principles of proper accounting.

T chart debit credit