Study Guides

Edexcel International A Level Accounting: The double entry system (YAC11)

Study guide to the double entry system for Edexcel International A-Level Accounting: ledgers, books of prime entry, adjustments, allowances and ICT.

Subject: Accounting
Level: AS LEVEL
Topic: Principles of accounting and double entry bookkeeping
Author: Marlbridge Academic Team
Updated: 25 October 2026
Reviewed by: Javaid Iqbal Sabri (what this means)

Aligned to Pearson Edexcel A Level Accounting (YAC11), 2015-onwards. Official specification .

Syllabus page (what it covers and how it is assessed): Pearson Edexcel A Level Accounting.

Syllabus points this page covers

YAC11 (AS Level)

1.1.3-1.1.7 Double entry system

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This guide teaches the double entry system, content points 1.1.3 to 1.1.7 of Unit 1, in the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018. Unit 1 topics are International AS. All businesses and figures are invented, and every amount is in dollars.

Course hub: Edexcel A-Level Accounting. Printable checklist: Edexcel accounting checklist. Check your level with a free diagnostic. Companion pages: revision notes and practice questions. Related: the Topic 1 study guide and the control accounts guide.

What this guide covers

Point	You must be able to
1.1.3	Record transactions in the books of account
1.1.4	Record transactions in the books of prime entry
1.1.5	Make end of period transfers and adjustments
1.1.6	Keep ledger accounts for an allowance for irrecoverable debts, including calculating it from a schedule of trade receivables
1.1.7	Describe the use of ICT in recording transactions and preparing reconciliations (control accounts, trial balance) and financial statements

The specification says you will not be examined on specific applications or software packages. Point 1.1.7 is about what ICT does for the accounting system, not any product.

1.1.3 Recording transactions in the books of account

Every transaction has two effects, so it is recorded twice: once as a debit in one account and once as a credit of the same amount in another. Total debits always equal total credits.

Type of account	Increase	Decrease
Assets (bank, inventory, non-current assets, trade receivables)	Debit	Credit
Expenses and drawings	Debit	Credit
Liabilities (trade payables, loans)	Credit	Debit
Capital	Credit	Debit
Revenue and other income	Credit	Debit

The books of account are the ledgers. The sales ledger holds a personal account for each credit customer, the purchases ledger one for each supplier, and the general ledger holds the nominal accounts (expenses, revenue, drawings, capital) and the real accounts (assets such as shop fittings).

Worked example: a month of transactions

Kestrel Ridge Hardware starts trading on 1 March. For each transaction, decide what increases or decreases, then apply the table above.

No.	Transaction	Debit	Credit	Amount
1	Owner pays capital into the bank	Bank	Capital	25,000
2	Buys shop fittings, paying by bank	Shop fittings	Bank	6,000
3	Buys goods on credit from Oakhollow Tools	Purchases	Oakhollow Tools	8,000
4	Sells goods on credit to Ellerby Builders	Ellerby Builders	Sales	4,500
5	Pays rent by bank	Rent	Bank	900
6	Returns goods to Oakhollow Tools	Oakhollow Tools	Purchases returns	500
7	Cash sales banked	Bank	Sales	2,300
8	Ellerby Builders return goods	Sales returns	Ellerby Builders	300
9	Pays Oakhollow Tools 7,300 in full settlement of 7,500	Oakhollow Tools	Bank 7,300; Discount received 200	7,500
10	Ellerby Builders pay 4,100 in full settlement of 4,200	Bank 4,100; Discount allowed 100	Ellerby Builders	4,200
11	Owner draws money for personal use	Drawings	Bank	700

The bank account then looks like this.

Bank account
Capital	25,000	Shop fittings	6,000
Sales	2,300	Rent	900
Ellerby Builders	4,100	Oakhollow Tools	7,300
		Drawings	700
		Balance c/d	16,500
	31,400		31,400

The balance b/d of 16,500 is a debit. Both personal accounts close to nil: Oakhollow Tools owed 8,000, less 500 returned, less 7,300 paid, less 200 discount; Ellerby Builders owed 4,500, less 300 returned, less 4,100 paid, less 100 discount.

The trial balance lists every closing balance and checks that the totals agree.

Account	Debit	Credit
Bank	16,500
Shop fittings	6,000
Purchases	8,000
Rent	900
Sales returns	300
Discount allowed	100
Drawings	700
Capital		25,000
Sales		6,800
Purchases returns		500
Discount received		200
Total	32,500	32,500

Agreement shows debits equal credits. It does not prove every entry is correct, because some errors leave both sides equal.

Of eleven transactions, seven touch the bank. The bank account shows debits of 31,400 and credits of 14,900 plus a balance carried down of 16,500, which is brought down as a debit. — Seven of the eleven transactions pass through the bank account, leaving a debit balance of 16,500.

The Kestrel Ridge trial balance lists seven debit balances and four credit balances, each with a bar. Both columns total 32,500 dollars. — Debits and credits both total 32,500, so the trial balance agrees.

Six T-accounts show which side increases each account type: assets, expenses and drawings on the debit side; liabilities, income and capital on the credit side. An example buys a 4,000 dollar van by bank: debit Van, credit Bank. The rule is debit the receiver, credit the giver. — Debit the account that receives value and credit the one that gives it; each account type increases on one side only.

A K Lee ledger account is balanced: debits 300 and 450, credits 500 and 50, balance carried down 200, both sides 750, and 200 brought down on the debit side. A running balance layout (Cambridge only) gives the same 200 Dr. — Balancing adds both sides, inserts the balance carried down, and brings it down on the opposite side.

Six small debit and credit examples show omission, commission, principle, original entry, reversal and compensating errors. In each, total debits still equal total credits, so the trial balance agrees even though the books are wrong. — A balanced trial balance does not prove the books are correct.

1.1.4 Books of prime entry

A book of prime entry gives each transaction its first written record, ahead of any ledger posting. Grouping similar items lets ledger postings be made from totals.

Book	Records	Postings
Sales day book	Credit sales invoices	Each invoice to the customer’s account (debit); total to Sales (credit)
Purchases day book	Credit purchase invoices	Each invoice to the supplier’s account (credit); total to Purchases (debit)
Sales returns day book	Credit notes issued	Each to the customer (credit); total to Sales returns (debit)
Purchases returns day book	Credit notes received	Each to the supplier (debit); total to Purchases returns (credit)
Cash book	Receipts and payments by bank and cash, plus discounts	See below
Petty cash book	Small payments from a float	See below
Journal	Anything that has no other book	Debit and credit named, with a narrative

Sales day book

Kestrel Ridge Hardware’s April invoices are 1,200 to Ellerby Builders, 860 to Rowancroft Roofing and 640 to Ellerby Builders. The total is 2,700, debited as three amounts to the personal accounts and credited once to Sales. Credit notes of 150 and 90 in the sales returns day book total 240, debited to Sales returns.

Cash book

The cash book does two jobs: it is a first record of cash and bank items and also the cash and bank ledger account. In a three-column cash book, columns for discount allowed (left) and discount received (right) sit beside the cash and bank columns. The individual discounts are posted to the personal accounts straight away. At the end of the period, the left column total is debited to Discount allowed and the right column total credited to Discount received. In transactions 9 and 10 above, the 200 and 100 would appear in those columns.

A 3,200 dollar list price less 15 percent trade discount (480, never recorded) gives an invoice of 2,720. A 2.5 percent cash discount of 68 is recorded on payment, so the cheque is 2,652. Entries: debit supplier 2,720, credit bank 2,652, credit discounts received 68. — Trade discount is netted off before recording; cash discount is recorded when payment is made.

Petty cash book

Under the imprest system, a float of 150 is set. A month’s payments are postage 32, refreshments 18, travel 27 and cleaning 14, totalling 91. Each total goes in an analysis column and is debited to its expense account. The reimbursement of 91 restores the float to 150, so the bank is credited 91. The box holds 59 before reimbursement.

Journal

The journal records items such as buying a non-current asset on credit, writing off an irrecoverable debt and opening entries. Each entry shows the accounts debited and credited, the amount and a narrative.

Entry	Debit	Credit
Delivery van bought on credit from Hartleigh Motors	Motor vehicles 9,500	Hartleigh Motors 9,500

Narrative: purchase of a delivery van on credit, invoice dated 12 April.

Three credit sales invoices are entered in the sales day book, total 2,700 dollars. Each is debited separately to the customer in the sales ledger and the total is credited once to Sales, so debits equal credits. Credit notes of 150 and 90 total 240 and are debited to Sales returns. — Post each invoice to the customer, but post the day book total to Sales once.

A float of 150 dollars pays postage 32, refreshments 18, travel 27 and cleaning 14, a total of 91, leaving 59. The bank reimburses 91 to restore the float to 150, with each expense debited and the bank credited. — The imprest system tops the float back up by exactly what was spent.

A three-column cash book shows discount allowed of 100 beside a 4,100 receipt and discount received of 200 beside a 7,300 payment. Each discount is posted at once to the personal account; at period end the column totals are posted to the Discount allowed (debit) and Discount received (credit) accounts. — Individual discounts go to personal accounts at once; the column totals go to the discount accounts at period end.

Three cards show the purchases day book (8,000 invoice), purchases returns day book (500 credit note) and the journal (9,500 van on credit). Each ends in a debit and a credit of equal amount. — Every book of prime entry leads to an equal debit and credit in the ledger.

1.1.5 End of period transfers and adjustments

At the year end the ledgers need two kinds of work. Adjustments put each expense and income item into the right period (accruals and prepayments, depreciation, irrecoverable debts and inventory). Transfers then move the final figures to the statement of profit or loss, leaving the statement of financial position balances to be brought down.

Accruals and prepayments

Kestrel Ridge Hardware pays rent of 9,600 in the year. At the start of the year 800 was owed (an other payable) and at the end 1,000 is owed.

Rent account
Bank	9,600	Balance b/d (owed at start)	800
Balance c/d (owed at end)	1,000	Statement of profit or loss	9,800
	10,600		10,600

The charge is 9,600 + 1,000 − 800 = 9,800. On insurance, 400 was prepaid at the start. On 1 October 2,880 was paid for twelve months. Three months (720) have been used, so 2,160 is prepaid (an other receivable). The charge is 400 + 2,880 − 2,160 = 1,120. Income works the same way: commission received of 3,300, with 500 accrued at the start and 700 at the end, gives income of 3,300 − 500 + 700 = 3,500.

Of 11,200 dollars of rent paid in 2027, 800 clears rent owed from 2026, 9,600 is the 2027 expense and 800 is paid for January 2028 (a prepayment, other receivable). The rent payable account balances at 11,200 and the 800 is brought down as a debit. — Only the part of the cash paid that belongs to the year is charged to the income statement.

Twelve monthly boxes show 12,000 pounds of rent paid on 1 October with a 31 December year end. Three months (3,000) are an expense in the income statement; nine months (9,000) are a prepayment shown as a current asset. — Only the part of rent used in the year is an expense; the rest is a prepayment.

Other adjustments and transfers

Irrecoverable debts written off are debited to an expense account. A depreciation charge is debited to the depreciation expense account and credited to the provision for depreciation account; this guide does not teach the methods. Drawings are not an expense: the drawings account is closed to capital, so profit is unaffected.

Inventory is not updated during the year, so it needs a transfer. Opening inventory is 5,200, purchases 41,300, purchases returns 1,100 and closing inventory 6,400, giving cost of sales:

5,200 + 41,300 − 1,100 − 6,400 = 39,000.

Transfer	Debit	Credit
Opening inventory to cost of sales	Statement of profit or loss 5,200	Inventory 5,200
Purchases	Statement of profit or loss 41,300	Purchases 41,300
Purchases returns	Purchases returns 1,100	Statement of profit or loss 1,100
Closing inventory	Inventory 6,400	Statement of profit or loss 6,400

Revenue and expense accounts are cleared the same way, and the profit for the year is then transferred to capital.

A waterfall in dollars: opening inventory 5,200 plus purchases 41,300, less purchases returns 1,100 and closing inventory 6,400, leaves cost of sales of 39,000. — Because inventory is not updated during the year, cost of sales is found from opening inventory, purchases, returns and closing inventory.

Inventory, purchases and purchases returns accounts transfer to the statement of profit or loss in four numbered steps. Debits 46,500 less credits 7,500 give cost of sales of 39,000 dollars. — The four year-end transfers build cost of sales: 5,200 + 41,300 - 1,100 - 6,400 = 39,000.

1.1.6 Allowance for irrecoverable debts

An irrecoverable debt is a trade receivable that will not be paid. It is written off: debit Irrecoverable debts, credit the customer. An allowance for irrecoverable debts is different. It is an estimate of debts that may not be paid, held in its own account and deducted from trade receivables. It reflects prudence, because profit and assets should not be overstated.

The allowance is calculated after writing off irrecoverable debts. Only the change in the allowance goes through the statement of profit or loss.

Worked example: calculating from a schedule

Before any write-off, Kestrel Ridge Hardware’s trade receivables are 64,100. A debt of 1,600 is written off, leaving 62,500, analysed by age.

Age of debt	Balance	Rate	Allowance
Not yet due	38,000	1%	380
1 to 30 days overdue	12,400	4%	496
31 to 60 days overdue	8,500	10%	850
Over 60 days overdue	3,600	30%	1,080
Total	62,500		2,806

The existing allowance is 2,350, so the increase is 456.

Allowance for irrecoverable debts
Balance c/d	2,806	Balance b/d	2,350
		Statement of profit or loss (increase)	456
	2,806		2,806

The statement of financial position shows trade receivables of 62,500 less the allowance of 2,806, a net figure of 59,694. The statement of profit or loss is charged with the irrecoverable debts written off (1,600) and the increase (456).

If the next year’s schedule produced an allowance of 2,540, the allowance account would be debited with the decrease of 266 and the statement of profit or loss credited with 266, which increases profit. If a debt previously written off is later paid, debit Bank and credit Irrecoverable debts recovered.

Receivables of 64,100 less a 1,600 write-off leave 62,500, split by age with rates of 1, 4, 10 and 30 percent giving 380, 496, 850 and 1,080, a total allowance of 2,806. The increase of 456 on the existing 2,350 is charged to profit or loss and the statement of financial position shows 59,694. — Write off first, then apply age-band rates; only the increase reaches profit or loss.

Receivables of 48,600 less a 1,100 write-off give 47,500. A 3 percent allowance of 1,425 gives 46,075 in the statement of financial position. The allowance rises from 1,280 to 1,425 (145 expense) and falls to 1,260 the next year (165 income). — Only the change in the allowance is charged or credited to profit.

1.1.7 ICT in the double entry system

Accounting software posts a transaction to every account it affects from a single entry, completing the double entry automatically. A trial balance, a trade receivables ledger control account and draft financial statements can all be produced from the same data.

Benefit	Limitation
Faster recording and reporting	Wrong data in gives wrong figures out
No arithmetic slips in posting or totalling	Cost, training and backup arrangements
Control accounts and trial balances generated from the ledgers	Access and fraud risks need passwords and review
Statements can be re-run after an adjustment	Some errors are still invisible

Worked example: what ICT cannot see

A clerk keys a sale of 4,500 as 5,400. The package debits trade receivables 5,400 and credits Sales 5,400. The trial balance agrees, and the control account agrees with the personal ledger, but profit is overstated by 900. Only comparing the invoice with the entry finds it.

A sale of 4,500 is keyed as 5,400. The package posts debit trade receivables and credit sales of 5,400, so the trial balance and control account agree, but profit is overstated by 900. — ICT completes the double entry but cannot spot a wrong amount keyed in.

Common errors

Debiting an asset when it falls: a payment credits Bank, a receipt debits it.
Treating drawings as an expense, which wrongly reduces profit.
Posting discounts to the wrong side: Discount allowed is a debit, Discount received a credit.
Calculating the allowance before writing off the irrecoverable debt.
Charging the whole allowance to the statement of profit or loss each year rather than the change.
Believing a balanced trial balance proves the records are free of error.

Frequently asked questions

What is the double entry system in Edexcel IAL Accounting? Every transaction has two effects, so it is recorded twice: once as a debit in one account and once as a credit of the same amount in another. Total debits therefore always equal total credits.

What is the difference between the sales ledger, purchases ledger and general ledger? The sales ledger holds a personal account for each credit customer and the purchases ledger one for each supplier. The general ledger holds the nominal accounts, such as expenses, revenue, drawings and capital, and the real accounts for assets.

How does the imprest system work for petty cash? A fixed float is set, payments are recorded in analysis columns and each column total is debited to its expense account. At the end of the period the amount spent is reimbursed from the bank, restoring the float to its original level.

Are drawings an expense of the business? No. Drawings are not an expense, so they do not reduce profit; the drawings account is closed to the capital account. Treating drawings as an expense is a common error.

Does a balanced trial balance prove the accounts are correct? No. Agreement shows that total debits equal total credits, but some errors leave both sides equal. For example, a sale keyed as 5,400 instead of 4,500 is posted to both sides, so only comparing the invoice with the entry finds it.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11), Specification, Issue 2, September 2018, Unit 1, topic 1.1 content points 1.1.3 to 1.1.7.

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