DOUBLE ENTRY. In double-entry bookkeeping, sometimes called the Italian method on account of its origin, every transaction requires equal entries on both sides of the ledger. The number of entries on the two sides need not correspond, but the amounts must. This representation of every transaction on both sides of the ledger arises from keeping account, not with persons alone, but also with property and allowances. It is this feature which gives the system its name and constitutes its essential characteristic. Prop erty is conceived of as debtor or creditor, accord ing as it has required outlay or has brought in value or discharged indebtedness.
The simplest combination of books suited to double-entry bookkeeping consists of a daybook, journal, and ledger, ruled in accordance with the forms given below. Daybook and journal may be combined to form the daybook-journal. The daybook is the one in which are entered the de tails of each transaction at the time it occurs. This is the original entry, and should be made with the greatest care. It is this which must be brought into court in case of legal dispute. In this book, therefore, as in all original entry, erasures should be avoided, and all changes, for whatever reason made, should be so managed that their nature can readily be determined. In the journal are entered the names or titles of the ledger which are to be debited and credited, to gether with the proper dates and amounts. These are determined from the daybook record. and the process is termed journalizing. This is a very important part of the bookkeeper's work, and makes the largest demands upon his ability to think correctly. The remainder of his work, with the exception of making out the balance sheet, is to a large extent mechanical. The ledger is the book of accounts. From the journal the various items are carried to the ledger. items having the same name or title being gathered together under that title, each on its proper side, debits to debit side, credits to credit side; the left-hand side in this, as in all other books, being debit, and the right credit. The ledger, on ac count of the classified and summarized nature of its contents, is the business man's principal book of reference. If he wishes to find out how much John Doe owes him, it is to his ledger that he goes for information. Should he wish to pay Richard Roe the balance due him, it is from the ledger he will determine the amount which he must remit. In short, when he desires full, up to-date information regarding any matter con nected with his business, it is generally the ledger which is called into requisition. Toward the perfection of the contents of this book, there fore, all the bookkeeper's work is aimed. The process of carrying the items of the journal to the ledger is termed 'posting.' In performing this work. the careful bookkeeper will follow an invariable order, that the process may be made as nearly mechanical as possible. First, the
year should appear in the column at the left on the side to which the item is to be posted: the year need not be entered again until it changes. Next conic month, day, explanation, the page of the journal from which the entry is brought, and the amount of the entry. The page of the ledger to which the item has been posted is then immediately entered in the column at the left of the journal, on a line with the item transferred. The last step is taken to leave evidence that the posting has been done.
To open a set of hooks by double entry. the bookkeeper states in the opening entry of the daybook the kind or name of the business in which the proprietor is to engage. He then enu merates in detail the items which are to consti tute his investment, such as cash, real estate, accounts due him, etc.. and the debts, if any, which arc to be paid out of the business. These two sets of items represent. respectively, his re sources and liabilities. The difference between them will be his net investment. When this entry is journalized, each of the items which will make up the resources will be debited, and each of the titles entering into the liabilities will be correspondingly credited, and the proprietor's name or stodk will be credited for the net invest ment, or the difference between the sums of the two. When this journal entry has been posted, the books are properly opened. When the post ing for any period has been completed, the debit and credit sides of the ledger should be equal. To determine whether this is the ease or not, the trial balance is taken—that is, all the headings of the ledger, excluding those which are in bal ance or ruled up. are entered on a suitable sheet, together with the debit and credit footings of each in their proper columns; the two columns are then footed and ought to give equal amounts. If the results are not equal, there is certainly some error which must be found. On the other hand, should the trial balance prove, it would not be certain that no mistakes had been made. For the trial balance will not discover errors of computation, omission of transactions, posting to wrong accounts, etc. The trial balance should be taken, as a rule, at least once a month. The balance sheet, which is to be distinguished from the trial balance, involves a classification and analysis of accounts in such a way as to exhibit in detail the resources, liabilities, losses, gains, net gain or loss, and present capital of the business. The balance sheet is of great impor tance to the business man, and should be made at least once a year, or whenever the business is closed out or otherwise disposed of. It in volves the taking of an inventory of all the property on hand, which, in some lines of busi ness, is quite a laborious process. A form of balance sheet is presented below.