Accounting Equation The Double Entry Bookkeeping System

Accounting Equation Theory The accounting equation theory is also known as the double entry bookkeeping system. The accounting equation allows businesses, entrepreneurs and investors to keep track of every penny that is received or spent in a company. DOI:10.1080/09639284.2014.949803 The accounting equation is how the double entry bookkeeping system was established. The accounting equation represents the relationship that exists between assets, liabilities, and owner s/stockholder’s equity in a business. In order to read the balance sheet or income statement properly, it is necessary to understand this accounting equation. In addition, it is necessary to understand the accounting equation to understand the relationship that exists†¦show more content†¦This accounting equation/double entry system is also key to understanding the balance sheet. http://www.loscostos.info/financial-accounting/accounting-equation.html The development of the double entry bookkeeping system â€Å"marked the shift in bookkeeping from a mechanical task to a skilled craft, and represented the beginnings of the accounting profession. Historians generally accept that the Italian method of double entry bookkeeping, based upon making entries of equal amounts to the debit and credit of two different accounts, was the foundation for modern accounting.† DOI: 10.2308/accr-51115 The importance of the development of the double entry system (accounting equation) for accountants is that this system brought about the change from the mechanical task that almost anyone could do to the emergence of a skilled professional craft. DOI: 10.2308/accr-51115 The theory of the double entry system in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account in the financial statements of the company. Accounting systems consist of five major financial statements: a. Assets b. Liabilities c. Stockholder’s Equity d. Revenues e. Expenses In double entry, for every debit, there is an equal credit amount. The asset or any item in theShow MoreRelatedBookkeeping Essay974 Words   |  4 PagesBookkeeping Essay Sarah Kloft Kaplan University Professor Yancy July 17, 2012 Bookkeeping Essay Bookkeeping is an important aspect of any business. Bookkeeping can be defined as the practice of keeping the company’s books or records in an up-to-date and accurate manner (WiseGEEK, 2012). This allows the company to track in income and expenses of every day operations. 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