Introduction to Accounting Entries for a Business
Senior 2 · Entrepreneurship
Introduction to Accounting Entries for a Business
Lesson 3 of 5
25 min
In the last lesson every transaction changed two items in the accounting equation. Double-entry bookkeeping is simply a disciplined way of writing down both changes, every time. It is used by businesses all over the world because it has a built-in check: if the two sides do not agree, there is a mistake to find.
In double-entry bookkeeping, every transaction is recorded twice: as a debit in one account and an equal credit in another. An account is a record of all transactions for one item (cash, sales, rent, a customer). Accounts are kept in a book called the ledger, and each is drawn as a “T”: the left side is the debit (Dr) side and the right side is the credit (Cr) side. Debit and credit here mean only “left” and “right”, not good or bad.
| Type of account | Increase | Decrease |
|---|---|---|
| Assets (cash, bank, equipment, debtors) | Debit | Credit |
| Expenses and purchases of goods for resale; drawings | Debit | Credit |
| Liabilities (loans, creditors) | Credit | Debit |
| Capital | Credit | Debit |
| Income (sales) | Credit | Debit |
Because every transaction has a debit equal to its credit, the total of all debits in the ledger always equals the total of all credits. A list that checks this is called a trial balance.
Written by Ganzaa. Keza opens a stationery shop in Muhanga in September 2026.
| Date | Transaction | Debit | Credit |
|---|---|---|---|
| 1 Sept | Starts the business with 500,000 Frw cash | Cash | Capital |
| 2 Sept | Buys goods for resale, cash, 120,000 Frw | Purchases | Cash |
| 3 Sept | Buys goods on credit from Nziza Suppliers, 80,000 Frw | Purchases | Nziza Suppliers |
| 5 Sept | Cash sales, 90,000 Frw | Cash | Sales |
| 6 Sept | Pays rent in cash, 30,000 Frw | Rent | Cash |
| 8 Sept | Sells goods on credit to Gatete, 45,000 Frw | Gatete | Sales |
Each account names the other account in its details column. Here is the cash account, balanced at the end of the period:
Cash account
| Debit (Dr) | Credit (Cr) | ||||
|---|---|---|---|---|---|
| Date | Details | Frw | Date | Details | Frw |
| 1 Sept | Capital | 500,000 | 2 Sept | Purchases | 120,000 |
| 5 Sept | Sales | 90,000 | 6 Sept | Rent | 30,000 |
| 8 Sept | Balance c/d | 440,000 | |||
| Total | 590,000 | Total | 590,000 | ||
| 9 Sept | Balance b/d | 440,000 | |||
Cash received = 500,000 + 90,000 = 590,000 Frw; cash paid = 120,000 + 30,000 = 150,000 Frw. The balance, 590,000 − 150,000 = 440,000 Frw, is written on the smaller (credit) side as “balance carried down” (c/d) so both sides total 590,000, then brought down (b/d) on the debit side to start the next period. A debit balance on the cash account means the shop has 440,000 Frw cash.
Trial balance at 8 September 2026
| Account | Debit (Frw) | Credit (Frw) |
|---|---|---|
| Cash | 440,000 | |
| Purchases (120,000 + 80,000) | 200,000 | |
| Rent | 30,000 | |
| Gatete (debtor) | 45,000 | |
| Capital | 500,000 | |
| Nziza Suppliers (creditor) | 80,000 | |
| Sales (90,000 + 45,000) | 135,000 | |
| Totals | 715,000 | 715,000 |
The totals agree, so each transaction was entered once on each side.
Tip
Memory hook: DEAD CLIC. Debit to increase Expenses, Assets and Drawings; Credit to increase Liabilities, Income and Capital. For cash: money in is a debit, money out is a credit.
Solution: Debit Bank (asset up); credit Capital (capital up).
Solution: Debit Nziza Suppliers (liability down); credit Cash (asset down).
Solution: Debit Cash (asset up); credit Gatete (the debtor, an asset, goes down).
Solution: 370,000 − 115,000 = 255,000 Frw, a debit balance (cash in hand).
Summary
Sources and credits
Keza's transactions, the accounts, the trial balance and the practice items are written by Ganzaa.
This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
