Currently we have many technological advances, including computers and specialized programs (software), many companies have this tool in an integral way, that is, the hub is the accounting module, therefore it is left to a simple decision which is what will be recorded. When this is where the financial information begins to form, it all starts with a charge and payment, having an origin and looking for an application, this is double entry.
Let's define…
“The double item is an accounting system that consists of registering by means of charges and credits the increases and / or decreases or effects produced by the operations in the different elements of a balance sheet or income statement; maintaining equal sums between the items of charge and credit, in such a way that equality between the Assets and the sum of the Liabilities with the capital always subsists ”.
Analyzing the previous definition, we can describe the following formula (Assets equals Liabilities plus Capital):
A = P + C
It all started when…
It was first elaborated in Venice in the 15th century year of 1494 by the Franciscan friar Luca Paccioli, who had the idea of analyzing in the accounts the effects that the operations produce, always preserving the numerical equality of the balance. He realized the need to achieve precision, so he devised the T account (two columns) and applied the formula indicated above.
"The fundamental idea of Luca Paccioli was to ensure that all operations lead to the preparation of accounts."
The double game is based on an interpretation of the Universal Principle of Causality or "Law of Causality" (which is the law that originates from the Theory that an effect follows every cause).
In the heat of everyday life, accountants can become mechanized in terms of recording internal or external movements that economically affect an entity, stop seeing the origins and applications.
Economic Duality
The duality that manifests itself in any transaction or operation of: “give and receive” for the same amount and simultaneously, is the way for the Double Item System to function, using for this purpose the accounts or schemes representative of the Balance, today the Financial Information Standards stipulate them as follows:
"Economic Duality. The financial structure of an economic entity is made up of the resources available to it to achieve its purposes and the sources to obtain said resources, whether their own or that of others. ”
Consequently, with the Double Entry system, the increases and decreases suffered by the values of the Assets, Liabilities, Capital, Income and Expenses for the operations carried out in the economic entity, must be registered in the corresponding accounts, through CHARGES AND FERTILIZERS, respecting numerical equality, this being the basic accounting rule that will not lead to having clear, truthful and timely financial information.
Footnotes
- Basic Financial Statements, CP Juan Carlos Román Fuentes, ISEF Publishing. Financial Information Standards, 2008. CINIF Publishing; Mexican Institute of Public Accountants.
