Double-entry bookkeeping is a standard set of rules that are used when businesses record financial information. This set of rules is based on the accounting equation:
» Assets = Liabilities + Equity
For this equation to hold true, for each transaction an entry must be recorded as a debit or a credit in at least two accounts. The debits and credits must be equal for a transaction to be valid.
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Debits and Credits Chart |
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Account Type |
Increase (AN) |
Decrease |
|
Asset |
Debit |
Credit |
|
Liability |
Credit |
Debit |
|
Equity |
Credit |
Debit |
|
Income |
Credit |
Debit |
|
Expense |
Debit |
Credit |
|
Dedicated |
Credit |
Debit |
One of the main ideas to grab onto is the fact that when money comes into or leaves the asset account, it must be offset in another account.
For example, when the church receives offerings, that money goes into the bank account. When you record this transaction in an asset account, we see on the chart that we will debit that asset account in order to increase it. Now we need to match the credit side of the account.
Since we need to increase an account by a credit, you can see in the chart above that our options are liability, equity, income, or dedicated. Depending on the purpose of the money you can make your choice. If the offerings were just from the general offering plate, they will be recorded as income. If the offerings were from a memorial, they will probably be placed in a dedicated account depending on the instructions.
Either way, at the end of that transaction, the amount you increase the asset by will match the amount you increase the offset account.