Double entry theory in accounting

The double entry theory is an accounting system that is responsible for making records through credits and charges, increases and decreases or to record the effects generated by operations in the various elements of a balance sheet, keeping the amounts equal between credits and charges so that assets and liabilities are equal.

This theory determines that, in each of the accounting entries, two accounting accounts can be involved, one represents debit and the other credit. The sum of the record of the debit items must coincide with the sum of the record of the credit items.

Today, thanks to technological advances, there are efficient computers and specialized programs such as software, which serve as tools to help companies to be incorporated in a comprehensive manner in the accounting module and thus record the entire accounting system.

History of double entry theory in accounting

If we go back through time, it is possible to verify how long ago the double entry theory in accounting. During the thirteenth century some writings were found where this type of accounting procedure is determined, which are known as debits and credits.

Fray Luca Bartolomeo de Paccioli, known in the same way as Luga di Borgo, was the one who had the opportunity to get some scrolls that were used by the upper middle class. In these scrolls, the processes of possessions and some companies that belonged to this type of social class were reflected.

In this sense, Fray Luca made the decision to publish it and thus managed to popularize this favorable and innovative accounting system. Because of this, he is known by the phrase that says: There is no debtor without a creditor.

Following this novelty, continuity is given to principle of double accounting entry, reflecting in the debit the increase in the asset accounts, in the same way the decreases in assets, increases in liabilities and increases in stockholders' equity should be noted.

Principles of double entry theory in accounting

The principle of double entry theory it is based on the technique that is used to be able to reflect each one of the operations of the company during a specific time. In this way, it will be possible to see how two accounts are reflected in the accounting entry, being placed in the debit and the credit in accounting.

Among the most important principles are the following:

• The debtor is the one who receives and the creditor is the one who delivers what is in the debit.
• There is no debtor without a creditor and there is no creditor without a debtor, since the resources are given by themselves, because they come from somewhere.
• On the basis of the equilibrium of the equity equation, all value that comes in must be the same as the value that goes out.
• Every account must be canceled in the same way it is created, therefore, all value that enters through an account must leave the same account.

Role of Double Entry Theory in Accounting

What is double entry theory in accounting? What does it refer to or what are its functions? Next, we clarify these questions:

• The process proposed by the predecessor of probability Luca Paccioli during the Renaissance, consists of making a record within the journal of all operations as they go generating.
• This will depend on the entry and exit of the accounts, and then enter it daily within the ledger as they are classified in the corresponding accounts. From this process, all the data that will be used to prepare the annual financial statements will be obtained.
• In this sense, the double entry in accounting corresponds to the equilibrium balance taking into account the total assets of the company, since no operation should be a loss. In the event that one element decreases, it is because another increases.
• For this, each operation must be settled twice, both to the debit of one account, and to have of another account and it is very important that the two values ​​are in the same balance.
• In this case, the double entry is in charge of recording the effects that are generated in the commercial operations of the various items or balance sheet accounts so that they are maintained in total Balance.
• Mostly what goes into the account is reflected to the left and what goes out to the right and in this way a larger account known as a T account is constituted due to its structure. In conclusion, this account T represents the debit, the credit and the name of the account.

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