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For example, on a T-chart, debits are listed to the left of the vertical line while credits are listed on the right side of the vertical line making the companys general ledger easier to read.

Consider the word double in double entry standing for debit and credit.

The two totals for each must balance, otherwise there is an error in the recording.

The information they enter needs to be recorded in an easy to understand way.

This is why a T account structure is used, to clearly mark the separation between debits and credits.

However, since debits and credits are entered at the same time, these kinds of mistakes can be easier to catch if the accountant checks his numbers after every journal entry.

These errors may never be caught because a double entry system cannot know when a transaction is missing.

For instance, a company hires some extra temporary labor for a busy period in their factory.

The accounting department later catalogs those labor payments under operating expenses instead of under inventory costs (which is where factory labor costs should go).

If the labor costs are still debited and credited fully, then this type of mistake can also be difficult to catch.

This is because the types of financial documents both businesses and governments require cannot be created without the details that a double entry system provides.

These documents will allow for financial comparisons to previous years, help a company to better manage its expenses, and allow it to strategize for the future.

A single entry system records each of a companys financial transactions as a single entry in a log, as opposed to a double entry system which assigns each transaction to a category and records both a debit and credit for each.

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Bookkeeping Debit And Credit Acronyms