This article explains Double Entry Bookkeeping Accounts
Businesses can use double entry bookkeeping (in which each transaction is entered twice; both as a credit and debit transaction) when keeping their accounts which may serve to minimize errors and increase the chances of the books balancing.
Double entry bookkeeping receives it's name because all transactions will be entered twice, to debit and to credit. Therefore if the sum of the credit for all accounts and the sum of the debits for all accounts do not equal, an error has occurred.
You record Sales and Purchase transactions when the invoice is issued (using the invoice date), then the same transaction is entered in the Current Account or Cash spreadsheet when the item is paid for.
Purchases paid for by your business are entered in the Payments section as a debit within the Current Account/Cash spreadsheet.
Sales paid for by the customer are entered in the Receipts section as a credit within the Current Account/Cash spreadsheet.
Profit (which is taxed) is over simplistically Sales-Purchase, however your cash flow is based on your Creditors and Debtors position which is tracked separately through the Cash and Current Account spreadsheets.
Sales increment your "Trade Debtors" (people who owe you money) and a Receipt entered in the Current Account sheet decrements the Trade Debtors.
A similar pattern occurs with Purchases, these increment "Trade Creditors" (people you owe money) and a Payment entered in Current Account decrements the Trade Creditors.All Articles