Understanding more about double-entry bookkeeping

Double-entry bookkeeping is one of the commonest stumbling blocks that accounting students face on the road to qualifying.

Most experienced accountants would agree that it’s difficult to get your head around double-entry when you first start out.

AAT tutor Gill Myers is one of them: “Double-entry is unlike anything you’re likely to have come across before. People who are good at maths often think they’ll be good at accountancy but, while maths obviously helps, being organised and methodical is probably more helpful.”

While you might be struggling with what to debit and credit, and where, remember that every accountant lacked that knowledge at some point – so it can be learned.

Use your own experiences to understand bookkeeping

And, if you’re careful with your own cash, you may get the knack of double-entry bookkeeping quicker than others.

“People who care about their own money are likely to care about accounting for someone else’s,” says Myers. “If you regularly check your bank statements, then you’re likely to be a good candidate.”

But knowing the ins and outs of your own bank account could also cause confusion, as you’ll be used to a ‘credit’ meaning there’s money in your account. Particularly when it comes to the bank account, this is one of the biggest head-scratchers for someone new to bookkeeping.

Debits to increase, credits to decrease

“You have to switch your thought process from seeing transactions from a personal point of view to seeing them from a business’ point of view,” Myers explains.

“If your business is the bank, a credit means the balance is owed to the account holder, as it’s a liability for the bank. If you are the account holder, then you have an asset, as you have money in the account and are not overdrawn, so your version of the bank’s transactions would show a debit balance.”

Once students get their heads around the bank account, that’s when double-entry starts to click.

“Once you can see things from a business perspective, using debits to increase the organisation’s bank account and credits to decrease it, then the rules of double-entry (every transaction has two effects that are equal, opposite and balancing) help you work out which other accounts to use,” says Myers.

Make use of flash cards

Thinking about the bank account isn’t the only way in which double entry can start to make sense. You can also use visual aids to help picture where different transactions sit within the ledger.

“Using flash cards is really handy for learning double-entry,” says AAT tutor Cath Littler. “It brings a practical element to working out what sits where in the different accounts. I gave my students a set of flash cards to work with in class, some representing the accounts, and others representing the elements that go into the accounts.

At the end of the session, they refused to give them back – they found them that useful.”

Practice will make perfect

Above all, Myers and Littler agree that the more you actually do double-entry, the more sense it will start to make.

“Practice is the key to getting it right at the end of the day,” says Littler.

“The more you do it, the easier it’ll become. It will become second nature eventually.”

These tips were written by AAT tutors Gill Myers and Cath Littler.

This article appeared in our summer 2018 issue of 20 magazine.

Read more on double-entry bookkeeping;

• The dark side of double-entry bookkeeping
• Study tips: How manual bookkeeping can help you learn to use accounting software
• The most confusing accounting terms explained

Browse the full range of AAT study support resources here

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.