Under the double-entry system, there are two aspects of every transaction i.e. debit and credit. So, both aspects of each transaction are recorded. In this system, the transaction is recorded on the debit side and also on the credit side. For example, when goods are sold in cash this transaction involves two aspects i.e. cash is received and goods are sold. Thus, in the double-entry system cash account is debited and the sales account is credited. This system is based on the dual aspect principle of accounting that for each debit there must be a credit of equal amount. Following are the Stages of Double Entry System.
Stages of Double Entry System
Firstly, we record transactions from the vouchers into the Journal which is named the book of original entry.
Secondly, transactions within the Journal are classified then posted to their respective ledger accounts. For e.g.: Rent paid by cash are going to be recorded within the rent A/c and cash a/c. Then a Trial Balance is prepared to verify the correctness of the ledger accounts.
Lastly, final accounts are prepared to determine the profit earned or loss incurred as a result of operations.
Also, Read Meaning of BookKeeping