Why is "Reversing debit and credit" a common mistake in Double Entry System?

Why it happens: DEAD CLIC not memorised. How to avoid it: Debit increases assets/expenses/drawings (DEAD); credit increases liabilities/income/capital (CLIC). Check each entry against the rule. Source: 9706 Examiner Reports

Why is "Recording only one side of a transaction" a common mistake in Double Entry System?

Why it happens: Forgetting the second effect. How to avoid it: Every transaction needs two entries of equal value. A one-sided entry makes the trial balance fail to balance. Source: 9706 Examiner Reports

Why is "Crediting drawings (treating it like income)" a common mistake in Double Entry System?

Why it happens: Drawings reduce capital, so students credit it. How to avoid it: Drawings are DEBITED (DEAD). They reduce capital but are recorded on the debit side, with the credit going to bank or purchases (for goods). Source: 9706 Examiner Reports

Why is "Posting goods bought for resale to an asset account" a common mistake in Double Entry System?

Why it happens: Confusing 'purchases' (resale goods) with buying a non-current asset. How to avoid it: Goods bought for resale → 'Purchases' (expense). A non-current asset bought for use → the relevant asset account (e.g. Equipment). Source: 9706 Examiner Reports

Why is "Posting returns to the wrong account" a common mistake in Double Entry System?

Why it happens: Mixing up purchases returns and sales returns. How to avoid it: Goods returned TO a supplier → purchases returns (debit supplier). Goods returned BY a customer → sales returns (credit customer). Source: 9706 Examiner Reports

Why is "Writing the wrong narrative in the ledger account" a common mistake in Double Entry System?

Why it happens: Entering the account's own name instead of the opposite account. How to avoid it: The detail in each account is the NAME OF THE OPPOSITE ACCOUNT (the contra), e.g. in the bank account a rent payment is detailed 'Rent'. Source: 9706 Examiner Reports

Cambridge International A Levels Accounting (9706)

Double Entry System

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Detailed Study Notes

Detailed notes on The Accounting system for Cambridge International A Levels Accounting, covering key concepts, explanations, examples, and exam-focused revision points.

The Double Entry System — Cambridge AS & A Level Accounting 9706 Study Notes (2026-2028)

The engine of all accounting. Learn the principle of duality (every transaction has two equal and opposite effects), the debit and credit rules for assets, expenses, liabilities, income and capital, how to post to ledger (T) accounts, and how to balance them off. Master this and every later topic — financial statements, control accounts, depreciation — becomes mechanical.

At a glance

Duality: every transaction has two effects → recorded as one debit and one credit of equal value.
Debit = left side; Credit = right side of a ledger (T) account.
Debit increases: assets, expenses and drawings (mnemonic DEAD).
Credit increases: liabilities, income and capital (mnemonic CLIC).
For every entry: one account is debited and another is credited — total debits always equal total credits.
Ledger accounts record all changes; they are balanced off to find the closing balance.
A debit balance = an asset or expense; a credit balance = a liability, income or capital.
Double entry is the basis of the trial balance and all the financial statements.

What you’ll learn

Mapped to the Cambridge International A Level 9706 syllabus (2026-2028).

1.2.1 — Understand the principles of the double entry system to record business transactions.
1.2.1 — Apply the rules of debit and credit to assets, liabilities, capital, income and expenses.
1.2.1 — Prepare ledger accounts (links to 1.2 'Preparation of ledger accounts').
Link 1.2 — duality is one of the fundamental accounting concepts.

Duality: why there are always two sides

Every transaction affects at least two accounts — one debit and one credit of equal value.

Accounting is built on the principle of duality (the dual aspect concept): every transaction has two effects on the business.

Think of a simple example: the owner pays $5,000 into the business bank account as capital.

The business now has $5,000 more in the bank (one effect — an asset rises).
The business now owes the owner $5,000 (the second effect — capital rises).

Because there are always two effects, we record two entries of equal value — one on the debit side of one account and one on the credit side of another. This is why total debits always equal total credits, and why the accounting system 'self-checks' through the trial balance.

Debit and credit are just positions, not 'good' or 'bad':

Debit (Dr) = the left-hand side of an account.
Credit (Cr) = the right-hand side of an account.

A transaction is recorded by deciding which account to debit and which account to credit — never one without the other.

Duality = every transaction has two effects.
Record one debit and one credit of equal value.
Debit = left side; Credit = right side.
Total debits always equal total credits (the self-check).

See the full worked example for double entry system →

The debit and credit rules (DEAD CLIC)

Debit increases assets, expenses, drawings; credit increases liabilities, income, capital.

There are five types of account. Each has a 'natural' side on which an increase is recorded:

Account type	Increase recorded on	Decrease recorded on
Assets	Debit	Credit
Expenses	Debit	Credit
Drawings	Debit	Credit
Liabilities	Debit	Credit
Income	Debit	Credit
Capital	Debit	Credit

Memory aid — DEAD CLIC:

DEAD → Debit increases Expenses, Assets, Drawings.
CLIC → Credit increases Liabilities, Income, Capital.

How to record any transaction in three steps:

Identify the two accounts affected.
Classify each (asset/expense/drawings or liability/income/capital).
Apply DEAD CLIC to decide which is debited and which is credited.

Example — buy goods for resale on credit from a supplier, $800:

Purchases (an expense) increases → debit Purchases $800.
Trade payable (a liability) increases → credit the supplier $800.

DEAD: Debit increases Expenses, Assets, Drawings.
CLIC: Credit increases Liabilities, Income, Capital.
Three steps: identify accounts → classify → apply DEAD CLIC.
A decrease is recorded on the opposite side to the increase.

See the full worked example for double entry system →

Ledger (T) accounts and posting

Each account is a T-shape: debits on the left, credits on the right.

Every account is kept in the ledger and drawn as a 'T' account — debits on the left, credits on the right.

Posting means entering each transaction into the two relevant T-accounts. The entry on each side records the name of the other account (the 'double entry'), so you can always trace a transaction.

Example — paid rent $300 by cheque:

Rent account (expense, increase) → debit side: "Bank $300".
Bank account (asset, decrease) → credit side: "Rent $300".

The detail written in each account is the name of the opposite account, which is how double entry links the books together.

Ledger account = T-shape: Dr left, Cr right.
Posting = entering both halves of the transaction.
The narrative in each account names the opposite account.
This linking lets any transaction be traced through the books.

Balancing off an account

Total both sides, find the difference (the balance), and carry it down.

At the period end each account is balanced off to find its closing balance:

Total the larger side.
Insert a balance c/d (carried down) on the smaller side so both sides equal.
Bring the balance b/d (brought down) onto the opposite side below the totals — this is the closing balance.

Worked example — Bank account:

Dr	$	Cr	$
Capital	5 000	Rent	300
Sales	1 200	Purchases	800
		Balance c/d	5 100
	6 200		6 200
Balance b/d	5 100

The $5,100 debit balance b/d is the closing bank balance (an asset).

What the balance tells you:

A debit balance = an asset (e.g. bank, trade receivables) or an expense.
A credit balance = a liability (e.g. trade payables, loan), income, or capital.

These closing balances are exactly what is later listed in the trial balance.

Balance off = total the larger side, insert balance c/d, bring down balance b/d.
Debit balance = asset or expense.
Credit balance = liability, income or capital.
Closing balances feed straight into the trial balance.

See the full worked example for double entry system →

Double entry for the most common transactions

A reference table — memorise the entries for the transactions that appear in every paper.

These are the entries you will use again and again. Learn them so you never have to derive them under pressure.

Transaction	Debit	Credit
Owner pays in capital (cash)	Bank	Capital
Owner introduces an asset	The asset	Capital
Buy a non-current asset (cheque)	The asset	Bank
Buy a non-current asset on credit	The asset	The supplier (via general journal)
Buy goods for resale (cash)	Purchases	Bank
Buy goods for resale (credit)	Purchases	The supplier
Return goods to a supplier	The supplier	Purchases returns
Cash sale	Bank/Cash	Sales
Credit sale	The customer	Sales
Customer returns goods	Sales returns	The customer
Receive from a credit customer	Bank	The customer
Pay a credit supplier	The supplier	Bank
Pay an expense	The expense (e.g. rent)	Bank
Owner takes cash (drawings)	Drawings	Bank
Owner takes goods (drawings)	Drawings	Purchases (at cost)
Take out a bank loan	Bank	Loan
Repay part of a loan	Loan	Bank

Reading the table. Notice the pattern: an asset or expense rising is always the debit; a liability, income or capital rising is always the credit (DEAD CLIC). Goods bought for resale go to Purchases; an asset bought for use goes to its own account.

Capital/loan in → credit Capital/Loan, debit Bank/asset.
Goods for resale → Purchases; assets for use → the asset account.
Credit sale debits the customer; credit purchase credits the supplier.
Drawings are debited — cash drawings credit Bank, goods drawings credit Purchases (at cost).

See the full worked example for double entry system →

Trade discount vs cash discount in the books

Trade discount is never recorded; cash (settlement) discount is.

Two very different 'discounts' are tested — and confused — every year.

Trade discount — a reduction off the list price, often for buying in bulk or for being in the trade.

It is deducted before any entry is made, so only the net amount appears in the books.
It is never recorded in a discount account.

Cash (settlement) discount — a reduction for paying promptly (within an agreed period).

It is recorded, because it is only known when payment is made.
Discount allowed (given to a credit customer) is an expense → debited.
Discount received (from a credit supplier) is income → credited.
In a three-column cash book the discount columns are memoranda: their totals are posted to the discount allowed (Dr) and discount received (Cr) accounts.

Example. A $1,000 invoice (after trade discount) is settled within the discount period, taking 5% cash discount: the customer pays $950; discount allowed $50 is debited to the discount allowed account, and the customer's account is credited with the full $1,000 ($950 bank + $50 discount).

Trade discount: deducted before entry, never recorded.
Cash (settlement) discount: recorded when payment is made.
Discount allowed = expense (Dr); discount received = income (Cr).
Cash-book discount columns are memoranda, posted to the discount accounts.

Quick recap

Duality: every transaction has two effects → one debit, one credit of equal value.
DEAD: debit increases expenses, assets, drawings.
CLIC: credit increases liabilities, income, capital.
Ledger accounts are T-shaped; posting records both halves, naming the opposite account.
Balance off to find the closing balance: total, balance c/d, balance b/d.
Debit balance = asset/expense; credit balance = liability/income/capital.

Memorise this

Verbatim phrases and definitions Cambridge mark schemes credit.

DEAD — Debit increases Expenses, Assets, Drawings.
CLIC — Credit increases Liabilities, Income, Capital.
Every transaction = one debit + one credit of equal value (duality).
Debit balance = asset or expense; credit balance = liability, income or capital.

How it’s examined

Underpins the whole of Paper 1 and Paper 2. Directly tested by State the double entry to record [a transaction] and Prepare the [named] ledger account tasks (commonly 3-6 marks, marked per correct entry/figure). Examiner reports note that candidates lose marks by reversing debit and credit, omitting one half of the entry, or mislabelling the contra (opposite-account) narrative.

Sources: Cambridge International AS & A Level Accounting 9706 syllabus (2026-2028); 9706/22 Paper 2 question paper & mark scheme, Feb/Mar 2024; 9706 Examiner Reports (Paper 1 & Paper 2), 2022-2024. Last reviewed 2026-06-17.

Take this whole topic with you

Step-by-step worked examples — Double Entry System

Step-by-step solutions to past-paper-style questions on double entry system, written exactly the way a tutor would explain them at the board.

Question type:

1Double entry for capital introduced (2 marks)
Getting startedIdentify & classify• 9706 Paper 2 style• double entry, AO1
Question
The owner pays $5,000 of personal money into the business bank account as capital. State the double entry to record this. (2 marks)
Step-by-step solution
1. Step 1
  Bank (an asset) increases → debit Bank $5,000 (DEAD: debit increases assets).
2. Step 2
  Capital increases → credit Capital $5,000 (CLIC: credit increases capital).
Answer
Debit Bank $5,000; Credit Capital$ 5,000.
Examiner tip
1 mark for each correct side. Both account name and side must be right.
2Double entry for a credit purchase (2 marks)
Getting startedIdentify & classify• double entry, purchases, AO1
Question
Goods for resale costing $800 are bought on credit from supplier T Ltd. State the double entry. (2 marks)
Step-by-step solution
1. Step 1
  Purchases (an expense) increases → debit Purchases $800 (DEAD).
2. Step 2
  T Ltd is a trade payable (liability) that increases → credit T Ltd $800 (CLIC).
Answer
Debit Purchases $800; Credit T Ltd (trade payable)$ 800.
Examiner tip
Use the 'Purchases' account for goods bought for resale — not an asset account. Goods bought on credit credit the supplier, not 'bank'.
3Classify accounts as debit or credit balances (5 marks)
Building confidenceIdentify & classify• balances, AO1, AO2
Question
State whether each account normally has a debit or a credit balance: (i) Trade receivables; (ii) Bank loan; (iii) Rent payable (expense); (iv) Sales revenue; (v) Capital. (5 marks)
Step-by-step solution
1. Step 1
  (i) Trade receivables = asset → debit balance.
2. Step 2
  (ii) Bank loan = liability → credit balance.
3. Step 3
  (iii) Rent payable = expense → debit balance.
4. Step 4
  (iv) Sales revenue = income → credit balance.
5. Step 5
  (v) Capital = owner's claim → credit balance.
Answer
(i) Dr; (ii) Cr; (iii) Dr; (iv) Cr; (v) Cr.
Examiner tip
Assets and expenses = debit balances; liabilities, income and capital = credit balances (DEAD CLIC).
4Post a series of transactions to the bank account (5 marks)
Building confidenceMulti-step problem• 9706 Paper 2 style• ledger, posting, AO1, AO2
Question
Record these in the bank account and balance it off: 1 May capital introduced $5,000; 3 May cash sales$ 1,200; 5 May paid rent $300; 8 May paid for purchases$ 800. (5 marks)
Step-by-step solution
1. Step 1
  Debit side (money in): Capital $5,000; Sales $1,200.
2. Step 2
  Credit side (money out): Rent $300; Purchases $800.
3. Step 3
  Total debit = $6,200; total credit so far = $1,100. Insert balance c/d $5,100 on the credit side.
4. Step 4
  Both sides total $6,200; bring down balance b/d $5,100 on the debit side.
Answer
Closing bank balance = $5,100 debit (an asset). Dr: Capital 5,000 + Sales 1,200; Cr: Rent 300 + Purchases 800 + Balance c/d 5,100.
Examiner tip
Marks for correct entries on the correct sides + correct balance c/d/b/d. 'Money in' is debited in the bank (asset) account.
5Identify both effects of transactions (6 marks)
StretchIdentify & classify• double entry, AO2
Question
State the account to debit and the account to credit for each: (i) bought a motor vehicle paying by cheque; (ii) returned faulty goods to a credit supplier; (iii) a credit customer paid the amount owing by bank transfer. (6 marks)
Step-by-step solution
1. Step 1
  (i) Debit Motor vehicles (asset up); Credit Bank (asset down).
2. Step 2
  (ii) Debit Supplier (trade payable) (liability down); Credit Purchases returns (reduces purchases).
3. Step 3
  (iii) Debit Bank (asset up); Credit Trade receivable / customer (asset down).
Answer
(i) Dr Motor vehicles, Cr Bank; (ii) Dr Supplier, Cr Purchases returns; (iii) Dr Bank, Cr Customer.
Examiner tip
Returns to a supplier reduce the payable (debit the supplier) and go to 'purchases returns', not 'sales'.
6Explain the effect of a one-sided entry (5 marks)
StretchWord problem• double entry, errors, AO2
Question
A bookkeeper debited the rent account with $300 but made no other entry. Explain the effect on the accounting records and how double entry would have prevented it. (5 marks)
Step-by-step solution
1. Step 1
  Only one side of the transaction was recorded, so total debits no longer equal total credits.
2. Step 2
  The trial balance will not balance — the debit total exceeds the credit total by $300.
3. Step 3
  Under correct double entry, paying rent should be debit Rent $300 and credit Bank $300.
4. Step 4
  Because every transaction needs two equal entries, the missing credit to Bank would have kept debits equal to credits, preventing the imbalance.
Answer
Debits exceed credits by $300 so the trial balance fails to balance; the missing credit to Bank ($ 300) is needed to complete the double entry.
Examiner tip
Link the one-sided error to the trial balance imbalance and state the correct full entry.
7Owner takes goods for personal use (4 marks)
Building confidenceIdentify & classify• drawings, business entity, AO1, AO2
Question
The owner of a business takes goods that cost $500 from inventory for personal use. (a) State the double entry to record this. (b) State the concept that requires this entry. (4 marks)
Step-by-step solution
1. Step 1
  (a) The owner has taken goods out of the business → debit Drawings $500 (DEAD: drawings increase on the debit side).
2. Step 2
  The goods leave Purchases (they were bought for resale but not sold) → credit Purchases $500 at cost, not selling price.
3. Step 3
  (b) The business entity concept: the owner's private consumption must be separated from the business's expenses.
Answer
(a) Dr Drawings $500; Cr Purchases$ 500 (at cost). (b) Business entity concept.
Examiner tip
Credit Purchases (not Sales) and use COST, not selling price — no profit is made on goods taken by the owner.
8Contra (set-off) between the ledgers (5 marks)
StretchMulti-step problem• 9706 Paper 2/3 style• contra, set-off, AO2
Question
D Ross is both a credit customer (owes the business $1,200 in the sales ledger) and a credit supplier (the business owes D Ross$ 800 in the purchases ledger). The two balances are set off against each other. (a) State the double entry for the contra. (b) State the remaining balance and in which ledger. (5 marks)
Step-by-step solution
1. Step 1
  Set off the smaller amount, $800.
2. Step 2
  (a) Reduce the amount owed to D Ross → debit D Ross (purchases ledger) $800; reduce the amount owed by D Ross → credit D Ross (sales ledger) $800.
3. Step 3
  The purchases ledger account is now cleared ($800 − $800 = 0).
4. Step 4
  (b) The sales ledger account now shows $1,200 − $800 = $400 still owed to the business (a debit balance in the sales ledger).
Answer
(a) Dr D Ross (purchases ledger) $800; Cr D Ross (sales ledger)$ 800. (b) $400 still owed to the business in the sales ledger.
Examiner tip
Set off the smaller balance. The contra reduces both the receivable and the payable; it also appears in both control accounts (1.4.4).
9Record a dishonoured cheque (5 marks)
StretchMulti-step problem• dishonoured cheque, AO2
Question
Customer M Lee paid $2,000 by cheque to settle an invoice. The cheque was later dishonoured by the bank. (a) State the original double entry when the cheque was received. (b) State the double entry to record the dishonour. (c) State the effect on M Lee's account. (5 marks)
Step-by-step solution
1. Step 1
  (a) On receipt: debit Bank $2,000 (asset up); credit M Lee $2,000 (receivable cleared).
2. Step 2
  (b) On dishonour: reverse the entry — debit M Lee $2,000 (the debt is reinstated) and credit Bank $2,000 (the money never arrived).
3. Step 3
  (c) M Lee's account once again shows a $2,000 debit balance — the customer still owes the business.
Answer
(a) Dr Bank, Cr M Lee $2,000. (b) Dr M Lee, Cr Bank$ 2,000. (c) M Lee owes $2,000 again.
Examiner tip
A dishonoured cheque is simply the reversal of the receipt; the debt is reinstated. This also appears in bank reconciliations (1.4.3).
10Post a full set of transactions and extract balances (8 marks)
StretchMulti-step problem• 9706 Paper 2 style• ledger, comprehensive, AO1, AO2
Question
On 1 July Tariq started business by paying $30,000 into the bank and introducing a vehicle worth$ 10,000. During July: bought goods on credit from W Ltd $6,000; cash sales$ 4,000 banked; sold goods on credit to R Khan $3,500; paid rent$ 900 by cheque; paid W Ltd $5,000 by cheque; received$ 2,000 from R Khan by bank transfer. Prepare the capital, bank, W Ltd and R Khan accounts and state each closing balance. (8 marks)
Step-by-step solution
1. Step 1
  Capital account (Cr): Bank 30,000 + Vehicle 10,000 = $40,000 credit balance.
2. Step 2
  Bank account — Dr: Capital 30,000; Sales 4,000; R Khan 2,000 (total 36,000). Cr: Rent 900; W Ltd 5,000 (total 5,900).
3. Step 3
  Bank balance c/d = 36,000 − 5,900 = $30,100 debit.
4. Step 4
  W Ltd (Cr) account: Cr Purchases 6,000; Dr Bank 5,000 → $1,000 credit balance (still owed).
5. Step 5
  R Khan account: Dr Sales 3,500; Cr Bank 2,000 → $1,500 debit balance (still owing to Tariq).
Answer
Capital $40,000 Cr; Bank$ 30,100 Dr; W Ltd $1,000 Cr; R Khan$ 1,500 Dr.
Examiner tip
The vehicle introduced increases capital (not bank). Marks per correct entry and balance across the four accounts.

Model Answers — Double Entry System

High-scoring sample answers for double entry system on the Cambridge IGCSE paper, with examiner-style notes mapping each response to the mark scheme and assessment objectives.

Question 1
9706 Paper 2 style2 marks
Q (2 marks). A business pays $450 wages by bank transfer. State the double entry to record this.
Model answer
Debit Wages account $450 (an expense increases — DEAD). Credit Bank account $450 (an asset decreases — money out).
Why this scores
Marking (point-based, 2). 1 mark for the correct debit (Wages), 1 for the correct credit (Bank). Both name and side must be right.
Question 2
9706 Paper 2 style4 marks
Q (4 marks). State the double entry for each transaction: (a) sold goods on credit to K Patel $600; (b) paid a trade payable, J Singh,$ 400 by cheque.
Model answer
(a) Sold goods on credit to K Patel $600

Debit K Patel (trade receivable) $600 (asset increases).

Credit Sales $600 (income increases).

(b) Paid J Singh $400 by cheque

Debit J Singh (trade payable) $400 (liability decreases).

Credit Bank $400 (asset decreases).
Why this scores
Marking (point-based, 4). 1 mark per correct entry (4 entries). A credit sale debits the customer and credits Sales; paying a supplier debits the supplier and credits Bank.
Question 3
9706 Paper 2 style5 marks
Q (5 marks). Prepare the trade payable (P Mills) account from the following and balance it off: 1 June balance owing $900; 6 June bought goods on credit$ 1,500; 12 June returned goods $200; 20 June paid$ 1,000 by cheque.
Model answer
P Mills account

Dr $ Cr $
Purchases returns 200 Balance b/d 900
Bank 1 000 Purchases 1 500
Balance c/d 1 200
2 400 2 400
Balance b/d 1 200

The closing balance is a $1,200 credit balance — the amount still owed to P Mills (a trade payable/liability).
Why this scores
Marking (point-based, 5). Opening balance b/d on the credit side (1); credit purchases (1); debit returns (1); debit bank payment (1); correct balance c/d/b/d $1,200 (1). A payable is a credit balance.
Question 4
9706 Paper 2 style4 marks
Q (4 marks). Explain the principle of duality and how it helps to check the accuracy of the accounting records.
Model answer
Duality (the dual aspect concept) means that every transaction has two effects on the business, which are recorded as a debit entry in one account and an equal credit entry in another.

Because each transaction is recorded with equal debit and credit entries, the total of all debit balances should equal the total of all credit balances. This allows the bookkeeper to prepare a trial balance: if the two totals agree, it provides a check that, arithmetically, the double entry has been completed correctly for each transaction.
Why this scores
Marking (point-based, 4). ~2 marks for explaining duality (two effects → equal debit and credit) and ~2 for the accuracy check (equal totals → trial balance agreement). Note it only checks arithmetic, not every type of error.
Question 5
9706 Paper 2 style6 marks
Q (6 marks). A trainee recorded the purchase of a delivery van, $18,000 paid by cheque, by debiting Purchases and crediting Bank. (a) State why this is incorrect. (b) State the correct double entry. (c) Explain the effect of the error on the financial statements if it is not corrected.
Model answer
(a) Why it is incorrect. A delivery van is a non-current asset bought for use in the business, not goods bought for resale, so it should not be posted to the Purchases account.

(b) Correct double entry. Debit Motor vehicles (non-current asset) $18,000; Credit Bank $18,000.

(c) Effect if not corrected.

Purchases (and therefore cost of sales) is overstated by $18,000, so gross profit and profit for the year are understated by $18,000.

Non-current assets in the statement of financial position are understated by $18,000 (the van is missing).

This is an error of principle — the trial balance still balances (debit and credit are equal), so it would not be revealed by the trial balance.
Why this scores
Marking (point-based, 6). ~1 for identifying it as a non-current asset/error of principle, 2 for the correct entry, ~3 for the effects (profit understated, assets understated, TB still balances). Recognising it as an error of principle that the trial balance will not detect is the high-value point.
Question 6
9706 Paper 2 style6 marks
Q (6 marks). Explain three benefits to a business of maintaining a full double entry system of accounting records.
Model answer
1. Accuracy and error detection. Because every transaction is recorded with equal debit and credit entries, the records can be checked by preparing a trial balance; if the totals agree it confirms the arithmetic of the double entry, helping to detect many errors.

2. Complete financial information. A full system records all assets, liabilities, income and expenses, so the business can prepare reliable financial statements (statement of profit or loss and statement of financial position) to measure profit and financial position.

3. Better decision-making and control. Detailed records (e.g. of receivables, payables and expenses) help managers monitor and control the business, support decision-making, and provide evidence for tax, lenders and other stakeholders.
Why this scores
Marking (point-based, 6). ~2 marks per developed benefit (state + explain). Distinct points such as error detection via the trial balance, preparation of financial statements, and control/decision-making each score.
Question 7
9706 Paper 2 style3 marks
Q (3 marks). State the double entry to record each: (a) bought a computer for office use, paying $1,500 by cheque; (b) returned faulty goods to credit supplier H Ltd,$ 300; (c) the owner used $700 of private money to pay a business supplier, P Ltd.
Model answer
(a) Dr Office equipment $1,500; Cr Bank $1,500. (b) Dr H Ltd (trade payable) $300; Cr Purchases returns $300. (c) Dr P Ltd (trade payable) $700; Cr Capital $700 (the owner has introduced capital by settling a business debt).
Why this scores
Marking (point-based, 3). 1 mark per correct entry. (a) is a non-current asset (not Purchases); (c) paying a business debt from private funds is capital introduced.
Question 8
9706 Paper 2 style5 marks
Q (5 marks). Prepare the account of credit supplier G Stores and balance it off: opening balance owed $1,500; bought goods on credit$ 2,800; returned goods $300; paid$ 2,000 by cheque and received $50 cash discount.
Model answer
G Stores account

Dr $ Cr $
Purchases returns 300 Balance b/d 1 500
Bank 2 000 Purchases 2 800
Discount received 50
Balance c/d 1 950
4 300 4 300
Balance b/d 1 950

The closing balance is $1,950 owed to G Stores (a credit balance).
Why this scores
Marking (point-based, 5). Opening balance credit (1); purchases credit (1); returns debit (1); bank + discount received debits (1); balance c/d/b/d $1,950 (1). Discount received is debited in the supplier's account.
Question 9
9706 Paper 2 style6 marks
Q (6 marks). The owner of a business takes goods that cost $600 (selling price$ 900) for personal use. (a) State the double entry. (b) State and explain the accounting concept that requires the goods to be removed from the business records.
Model answer
(a) Double entry. Dr Drawings $600; Cr Purchases $600 — recorded at cost ($600), not selling price, because no sale has taken place and no profit is made on goods taken by the owner.

(b) Concept — the business entity concept. The business is treated as separate from its owner, so resources the owner takes for private use must be removed from the business's records (as drawings) rather than left as a business expense. Including them as a business cost would overstate the business's expenses and misrepresent its profit, so the entity concept keeps the owner's private consumption out of the business accounts.
Why this scores
Marking (point-based, 6). (a) Dr Drawings / Cr Purchases at cost (~2, with a mark for using cost not selling price); (b) name business entity (1) + developed explanation (~3).
Question 10
9706 Paper 2 style7 marks
Q (7 marks). Nadia started business on 1 June by paying $25,000 into the bank. During June: bought goods on credit from F Ltd$ 7,000; cash sales $5,500 banked; paid F Ltd$ 4,000 by cheque; paid rent $1,200 by cheque; returned goods to F Ltd$ 500. Prepare the bank account and the F Ltd account, and state each closing balance.
Model answer
Bank account

Dr $ Cr $
Capital 25 000 F Ltd 4 000
Sales 5 500 Rent 1 200
Balance c/d 25 300
30 500 30 500
Balance b/d 25 300

F Ltd account

Dr $ Cr $
Bank 4 000 Purchases 7 000
Purchases returns 500
Balance c/d 2 500
7 000 7 000
Balance b/d 2 500

Closing balances: Bank $25,300 (debit); F Ltd $2,500 (credit — still owed).
Why this scores
Marking (point-based, 7). Bank: capital + sales debits, F Ltd + rent credits, balance $25,300 (~4). F Ltd: purchases credit, bank + returns debits, balance$ 2,500 (~3). Cash sales are banked (debit Bank).

Dr	$	Cr	$
Purchases returns	200	Balance b/d	900
Bank	1 000	Purchases	1 500
Balance c/d	1 200
	2 400		2 400
		Balance b/d	1 200

Dr	$	Cr	$
Purchases returns	300	Balance b/d	1 500
Bank	2 000	Purchases	2 800
Discount received	50
Balance c/d	1 950
	4 300		4 300
		Balance b/d	1 950

Dr	$	Cr	$
Capital	25 000	F Ltd	4 000
Sales	5 500	Rent	1 200
		Balance c/d	25 300
	30 500		30 500
Balance b/d	25 300

Dr	$	Cr	$
Bank	4 000	Purchases	7 000
Purchases returns	500
Balance c/d	2 500
	7 000		7 000
		Balance b/d	2 500

Key Definitions and Keywords — Double Entry System

Definitions to memorise and the exact keywords mark schemes credit for double entry system answers — sharpened from recent examiner reports for the 2026 Cambridge IGCSE sitting.

Double entry system
Examiner keyword
A method of recording each transaction with two equal entries — a debit in one account and a credit in another — reflecting its two effects.
Duality (dual aspect) concept
Examiner keyword
The principle that every transaction has two effects on the business, recorded as equal debit and credit entries.
Debit (Dr)
Examiner keyword
An entry on the left-hand side of a ledger account; it increases assets, expenses and drawings and decreases liabilities, income and capital.
Credit (Cr)
Examiner keyword
An entry on the right-hand side of a ledger account; it increases liabilities, income and capital and decreases assets and expenses.
Ledger account
Examiner keyword
A record (in 'T' form) of all the increases and decreases affecting one item, e.g. bank, sales or a particular customer.
Posting
Entering a transaction into the ledger accounts by recording its debit and credit entries.
Balance c/d and b/d
Examiner keyword
Balance carried down (c/d) is inserted to equalise the two sides of an account; balance brought down (b/d) is the resulting closing balance.
Asset
A resource owned/controlled by the business expected to bring future benefit (e.g. bank, inventory, machinery). Normally a debit balance.
Liability
An amount the business owes (e.g. trade payables, loans). Normally a credit balance.
Capital
Examiner keyword
The owner's claim on the business (what the business owes the owner). Normally a credit balance.
Drawings
Cash or goods taken out of the business by the owner for personal use; debited (it reduces capital).
Contra (opposite-account) narrative
The detail written against an entry, which is the name of the other account in the double entry, linking the two accounts.

Common Mistakes and Misconceptions — Double Entry System

The traps other students keep falling into on double entry system questions — taken from recent Cambridge IGCSE examiner reports and mark schemes — and how to avoid them.

✕Reversing debit and credit
9706 Examiner Reports
Why it happens
DEAD CLIC not memorised.
How to avoid it
Debit increases assets/expenses/drawings (DEAD); credit increases liabilities/income/capital (CLIC). Check each entry against the rule.
✕Recording only one side of a transaction
9706 Examiner Reports
Why it happens
Forgetting the second effect.
How to avoid it
Every transaction needs two entries of equal value. A one-sided entry makes the trial balance fail to balance.
✕Crediting drawings (treating it like income)
9706 Examiner Reports
Why it happens
Drawings reduce capital, so students credit it.
How to avoid it
Drawings are DEBITED (DEAD). They reduce capital but are recorded on the debit side, with the credit going to bank or purchases (for goods).
✕Posting goods bought for resale to an asset account
9706 Examiner Reports
Why it happens
Confusing 'purchases' (resale goods) with buying a non-current asset.
How to avoid it
Goods bought for resale → 'Purchases' (expense). A non-current asset bought for use → the relevant asset account (e.g. Equipment).
✕Posting returns to the wrong account
9706 Examiner Reports
Why it happens
Mixing up purchases returns and sales returns.
How to avoid it
Goods returned TO a supplier → purchases returns (debit supplier). Goods returned BY a customer → sales returns (credit customer).
✕Writing the wrong narrative in the ledger account
9706 Examiner Reports
Why it happens
Entering the account's own name instead of the opposite account.
How to avoid it
The detail in each account is the NAME OF THE OPPOSITE ACCOUNT (the contra), e.g. in the bank account a rent payment is detailed 'Rent'.

Double Entry System

Detailed Study Notes

At a glance

What you’ll learn

Quick recap

Memorise this

How it’s examined

Take this whole topic with you

1Double entry for capital introduced (2 marks)

2Double entry for a credit purchase (2 marks)

3Classify accounts as debit or credit balances (5 marks)

4Post a series of transactions to the bank account (5 marks)

5Identify both effects of transactions (6 marks)

6Explain the effect of a one-sided entry (5 marks)

7Owner takes goods for personal use (4 marks)

8Contra (set-off) between the ledgers (5 marks)

9Record a dishonoured cheque (5 marks)

10Post a full set of transactions and extract balances (8 marks)

Double entry system

Duality (dual aspect) concept

Debit (Dr)

Credit (Cr)

Ledger account

Posting

Balance c/d and b/d

Asset

Liability

Capital

Drawings

Contra (opposite-account) narrative

✕Reversing debit and credit

✕Recording only one side of a transaction

✕Crediting drawings (treating it like income)

✕Posting goods bought for resale to an asset account

✕Posting returns to the wrong account

✕Writing the wrong narrative in the ledger account