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Accounting Foundations for UAE Business Owners/Double-Entry Bookkeeping
45 min

Double-Entry Bookkeeping

Records basic transactions using debits and credits and posts them to a simple general ledger.

Double-Entry Bookkeeping

Double-entry bookkeeping is the system that keeps the accounting equation balanced. Every transaction is recorded as at least two entries — a debit and a credit — so that total debits always equal total credits.

Debits and Credits

Every account has two sides — a debit side and a credit side. Which side increases or decreases an account depends on the account type:

  • Assets — increase with a debit, decrease with a credit.
  • Liabilities — increase with a credit, decrease with a debit.
  • Equity — increases with a credit, decreases with a debit.
  • Expenses — increase with a debit, decrease with a credit.
  • Income — increases with a credit, decreases with a debit.

Journals, Ledgers, and Trial Balance

  1. Journal — the first place a transaction is recorded, showing the debit and credit.
  2. Ledger — where entries are grouped by account (cash, sales, rent, etc.).
  3. Trial balance — a list of every ledger account and its balance, used to check that total debits equal total credits.

Common Entry Patterns

  • Cash sale — debit cash, credit sales.
  • Credit sale — debit accounts receivable, credit sales.
  • Cash purchase — debit the expense or asset, credit cash.
  • Credit purchase — debit the expense or asset, credit accounts payable.
  • Owner drawings — debit owner's drawings (equity), credit cash.

UAE Example

A Dubai retail business sells goods for 10,000 AED cash (standard-rated). The entries are: debit cash 10,000, credit sales 9,523.81, credit output VAT 476.19. The VAT component is a liability owed to the FTA until the return is filed and paid.

Practical UAE example

A Sharjah business pays 15,000 AED rent for the month by bank transfer. Journal entry: debit rent expense 15,000, credit bank 15,000. The expense increases, the bank asset decreases. The accounting equation stays balanced because equity decreases through the expense, and assets decrease through the cash outflow.

Key takeaways

  • Every transaction has at least two entries — a debit and a credit — and total debits must equal total credits.
  • Assets and expenses increase with debits; liabilities, equity, and income increase with credits.
  • The flow is journal to ledger to trial balance.
  • VAT on a sale is a liability, not income — it is owed to the FTA until filed and paid.

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This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.