The Double Entry System
The foundation of all accounting is the double-entry system. Every transaction affects two accounts: one is Debited and the other is Credited.
The DEAD CLIC Rule
To remember which side to record an entry, use this mnemonic:
- DEAD (Debit): Debit increases Expenses, Assets, and Drawings.
- CLIC (Credit): Credit increases Liabilities, Income, and Capital.
T-Account Format
Ledger accounts are prepared in a "T" shape. The left side is for Debit (Dr) and the right side is for Credit (Cr).
| Debit Side (Dr) | Credit Side (Cr) | ||
|---|---|---|---|
| Details | $ | Details | $ |
Balancing Off Accounts
According to the 2026/2027 syllabus, you must be able to balance ledger accounts at the end of a period:
- Balance c/d (carried down): The amount needed to make the sides equal.
- Balance b/d (brought down): The closing balance of the previous month, which becomes the opening balance of the new month.
Division of the ledger
To make accounting systems more manageable, the ledger is divided into three main sections. You must know which accounts go into which ledger:
- Sale Ledger(Receivable Ledger): Contains the personal accounts of credit customers.
- Purchases Ledger (Payable Ledger):Contains the personal accounts of credit suppliers.
- Nominal/General Ledger:Contains all other accounts (Assets, Liabilities, Capital, Expenses, and Revenue).
Practice Tip:"Double Entry" in Action
When a business sells goods on credit to a customer (e.g., J. Smith):
- Debit:J. Smith Account (to increase the asset/debtor).
- Credit:Sales Account (to increase the revenue).