Double-entry Bookkeeping
Since the 1500s, accounting and bookkeeping have followed the practice of Double-entry Bookkeeping. It implies that every transaction that has ledger entries to both the parties have a corresponding and opposite entry with the second party. The double-entry has two equal and corresponding sides known as debit and credit in the respective Ledgers of both the parties.
For instance, recording a sale of $100 might require two entries in the seller’s accounting ledgers: a debit of $100 to an account named “Cash” and a credit of $100 to an account named “Revenue.” Likewise, the buyer will also have two entries, namely: a $ 100 Credit in the account named “Asset” and a debit of $ 100 in the account named “Expenses”. The transaction is considered as reconciled when all accounts are “balanced.” The accounting equation is an error detection tool; if at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. However, satisfying the equation does not guarantee that there are no errors; the ledger may still “balance” even if the wrong ledger accounts have been debited or credited.
Triple Entry Accounting
Triple entry accounting has an enhancement over the conventional Double Entry Accounting system as all the accounting entries involving outside parties that are notarized and sealed by a third party, or a notary. These may include purchases of inventory and supplies, sales, tax and utility payments, and other expenses. The bookkeeping entries of both parties need to correspond to ensure that the given transaction is congruent, leaving all transactions balanced. A seller books debit to account for cash received, and a buyer books a credit for cash spent in the same transaction for the purchase, however, in separate sets of accounting records.
