IGCSE Accounting: The double entry system of book-keeping (Cambridge 0452)

Syllabus edition note. This resource follows the Cambridge IGCSE Accounting 0452 syllabus (and Cambridge O Level Accounting 7707, which has the same subject content for the same series) for exams in 2027, 2028 and 2029 (version 1), first examined in the March 2027 series in India and the June 2027 series elsewhere. If you sit 0452 in November 2026, you sit the 2026 syllabus (version 2), which differs: Paper 1 has 35 multiple-choice marks in 1 hour 15 minutes, not 40 marks in 1 hour 30 minutes; Topic 7 is “Accounting principles and policies”, without 7.2 Ethical considerations or 7.3 Technology and sustainability; 4.4 is “Irrecoverable debts and provision for doubtful debts”; income statements are named instead of statements of profit or loss; three-column running balance accounts are not required; Clubs and societies is 5.4 and Manufacturing accounts 5.5; and 6.3 is “Inter-firm comparison”. For this topic, the 2026 syllabus also asks candidates to complete pro-forma business documents and to explain the advantage of using books of prime entry, and it does not include digital ledger accounts or the benefits and limitations of keeping cash at the business property and of manual and digital original entry. If you sit in November 2026, work from the 2026 syllabus on the Cambridge International website.

This guide covers section 2.1, The double entry system of book-keeping, in Topic 2 of the Cambridge IGCSE Accounting 0452 syllabus for exams in 2027, 2028 and 2029 (version 1). The syllabus is not tiered, so every candidate studies the same content. Business documents and books of prime entry (2.2 and 2.3) are in the Topic 2 overview guide; this page goes deeper on ledger accounts. Start from the Accounting hub and tick progress off the printable checklist.

What 2.1 asks you to know

Syllabus point	Where it is covered below
The double entry system	The double entry rule
Prepare ledger accounts; post transactions	Posting a month of transactions
Calculate balances; make transfers to financial statements	Balancing; Transfers at the year end
Interpret ledger accounts and their balances	Reading an account
Three-column running balance format	Running balance accounts
Sales, purchases and nominal (general) ledgers	Division of the ledger
Ledger accounts kept digitally	Digital ledgers

The syllabus says you do not need to explain or use folio columns, so leave them out of every account.

The double entry rule

Every transaction has two effects. Double entry records both: one account is debited and another is credited by the same amount. Total debits therefore always equal total credits, which keeps the accounting equation (assets = capital + liabilities) in balance. The fundamentals guide explains the equation.

Type of account	Increase	Decrease
Assets (bank, shop fittings, customers’ accounts)	Debit	Credit
Expenses (rent, purchases, sales returns)	Debit	Credit
Drawings	Debit	Credit
Liabilities (suppliers’ accounts, loans)	Credit	Debit
Capital	Credit	Debit
Sales and other income, purchases returns	Credit	Debit

For any transaction, ask three questions. Which two accounts change? What type is each? Does each increase or decrease? The answers give the debit and the credit.

Posting a month of transactions

Vellacott Pottery Supplies, a new sole trader business, records these transactions in May. Posting means copying each half of the entry to its ledger account, with the date, the amount and the name of the other account in the details column. (In practice transactions are first listed in books of prime entry, covered in the overview guide.)

Date	Transaction	Debit	Credit	$
1	Owner pays money into the business bank account	Bank	Capital	12,000
2	Shop fittings bought, paid by bank transfer	Shop fittings	Bank	2,400
4	Goods bought on credit from Kirtle Clay	Purchases	Kirtle Clay	3,100
7	Goods sold on credit to Garnet Row Hotel	Garnet Row Hotel	Sales	2,250
9	Goods sold, money paid straight into the bank	Bank	Sales	1,800
12	Rent paid by bank transfer	Rent	Bank	600
15	Goods sent back to Kirtle Clay	Kirtle Clay	Purchases returns	300
18	Garnet Row Hotel sends goods back	Sales returns	Garnet Row Hotel	250
21	Kirtle Clay part-paid by bank transfer	Kirtle Clay	Bank	2,000
25	Garnet Row Hotel pays by bank transfer	Bank	Garnet Row Hotel	1,500
28	Owner takes money from the bank for personal use	Drawings	Bank	400

Notice that a payment to a supplier is a debit in the supplier’s account, because a liability is falling. A return by a customer is a credit in the customer’s account, because an asset is falling.

Balancing an account

The bank account has four payments and three receipts. To balance it:

1. Total each side (receipts $15,300, payments $5,400).
2. The difference ($9,900) is the balance.
3. Write it on the smaller side as Balance c/d (carried down), so both sides total $15,300.
4. Show the same figure on the other side below the totals as Balance b/d (brought down), the opening figure for June.

Bank account (May)
Dr                              |Cr
 1 Capital             12,000   | 2 Shop fittings        2,400
 9 Sales                1,800   |12 Rent                   600
25 Garnet Row Hotel     1,500   |21 Kirtle Clay          2,000
                                |28 Drawings               400
                                |31 Balance c/d          9,900
                       15,300   |                       15,300
 1 Balance b/d          9,900

The cash book records bank and cash transactions first and also serves as the ledger account for them (section 2.3), so the bank account is drawn here in ledger form.

Transfers at the year end

At the end of the financial year, income and expense accounts are closed by transferring their balances to the statement of profit or loss. Asset, liability and capital balances are not closed; they are carried down and reported in the statement of financial position.

Rent account                    Sales account
Dr          |Cr                 Dr          |Cr
Bank    600 |SoPL    600        SoPL  4,050 |Garnet Row Hotel  2,250
                                           |Bank              1,800

SoPL here stands for the statement of profit or loss account. Closing an expense account is a credit in that account, because the cost leaves it. Closing an income account is a debit, because the income leaves it. The matching entry goes on the opposite side of the statement of profit or loss account.

Account	Balance	Goes to
Sales	$4,050 Cr	Statement of profit or loss
Sales returns	$250 Dr	Statement of profit or loss, deducted from sales
Purchases	$3,100 Dr	Statement of profit or loss
Purchases returns	$300 Cr	Statement of profit or loss, deducted from purchases
Rent	$600 Dr	Statement of profit or loss
Shop fittings	$2,400 Dr	Statement of financial position, non-current assets
Bank	$9,900 Dr	Statement of financial position, current assets
Garnet Row Hotel	$500 Dr	Statement of financial position, current assets
Kirtle Clay	$800 Cr	Statement of financial position, current liabilities
Capital	$12,000 Cr	Statement of financial position, capital
Drawings	$400 Dr	Deducted from capital, not from profit

The debit balances and the credit balances both total $17,150 at 31 May, which is the check you meet in the trial balance and verification guide. Preparing the full statements is covered in the financial statements guide.

Running balance accounts

A three-column running balance account shows Debit, Credit and Balance columns. The entry goes in the same column as it would go on the same side of a two-sided account; the difference is that a new balance is worked out after every line, labelled Dr or Cr. There is no balancing step at the end, because the last balance is the closing balance.

Kirtle Clay account (purchases ledger), amounts in $
Date    Details            Debit    Credit    Balance
4 May   Purchases                     3,100    3,100 Cr
15 May  Purchases returns     300              2,800 Cr
21 May  Bank                2,000                800 Cr

Here the supplier’s balance is a credit, because the business owes money. For Garnet Row Hotel, a customer, sales of $2,250 give $2,250 Dr, the return of $250 gives $2,000 Dr, and the payment of $1,500 leaves $500 Dr.

Reading an account

Interpreting means saying what a balance tells you about the business.

Account	Debit balance	Credit balance
Customer (sales ledger)	The customer owes the business	The business owes the customer, for example after an overpayment
Supplier (purchases ledger)	The supplier owes the business, perhaps because of an overpayment	The business owes the supplier
Bank	Money held in the bank	Overdrawn: the business owes the bank
Expense	Cost for the period	Not normal; look for an error
Sales	Not normal; look for an error	Revenue for the period

From Kirtle Clay’s account you can also read the story: $3,100 bought, $300 returned, $2,000 paid, so $800 is still owed at 31 May.

Division of the ledger

The ledger is divided so that different types of account are kept together.

Ledger	Holds	Examples above
Sales ledger	Accounts of customers who buy on credit	Garnet Row Hotel
Purchases ledger	Accounts of suppliers who sell on credit	Kirtle Clay
Nominal (general) ledger	Every account that is not a customer’s or a supplier’s: assets, expenses, income, capital and drawings	Shop fittings, Rent, Sales, Purchases, Capital, Drawings, the two returns accounts

Splitting the ledger lets different staff look after customers and suppliers, and a customer’s balance can be found without searching every account.

Digital ledgers

Accounting software can keep the sales ledger, purchases ledger and nominal ledger digitally. You enter a transaction once, choose the accounts, and the software posts the debit and the credit, updates every balance and can produce reports. Benefits include speed, fewer arithmetic slips, easy searching and backup. Limitations include the cost of software and training, reliance on equipment and power, and security risks. Software cannot judge: if the wrong account is chosen, the wrong posting is made everywhere automatically, so you still need to understand debit and credit.

Common errors

• Debiting a supplier’s account to record a purchase, instead of crediting it.
• Writing the account’s own name in the details column, instead of the other account.
• Leaving off the Dr or Cr label in a running balance account.
• Carrying a balance down without making both sides total the same.
• Treating every debit balance as money owed to the business, ignoring bank and supplier accounts.
• Posting returns into the sales or purchases account instead of the returns account.
• Transferring drawings to the statement of profit or loss.

Next steps

Condense this into the revision notes, then test yourself with the practice questions and the free 10-minute diagnostics. The Topic 2 practice questions and revision notes cover the whole topic.

Frequently asked questions

How do you decide which account to debit and which to credit? Ask three questions: which two accounts change, what type of account each one is, and whether each is increasing or decreasing. The answers, with the debit and credit rules, give the entry.

Why is a payment to a supplier debited in the supplier’s account? The supplier’s account is a liability, and paying the supplier reduces that liability, so the entry goes on the debit side. A return by a customer is credited in the customer’s account for the same reason, because the asset falls.

What happens to income and expense accounts at the end of the year? They are closed by transferring their balances to the statement of profit or loss. Asset, liability and capital accounts are instead balanced and carried down to the next period.

Which ledger is each account kept in for Cambridge IGCSE Accounting 0452? Customers’ accounts are kept in the sales ledger, suppliers’ accounts in the purchases ledger, and all other accounts, such as assets, expenses, income and capital, in the nominal (general) ledger.

Official syllabus

Cambridge IGCSE Accounting 0452 syllabus for exams in 2027, 2028 and 2029 (version 1), Cambridge University Press and Assessment, section 2.1.