Steps to record a transaction under Double Entry System:

1. Identify atleast 2 parties involved in the transaction.
2. Identify basic account type of each party
3. Apply Debit and Credit rules for each party based on their account type
4. Total Transaction amount to be debited once and again credit once.
   (i.e. total debited amount = total credited amount)

Parties of business transaction:

To correctly identify the party from the business transaction, we must think what ledgers are maintained in the Books of organization for Accountancy purpose.

The following are the parties that can be identifiable from a business transaction upon their names ledgers can be created:

Person

Firm or organization name

Asset

Loan

Expense

Income

Profit

Loss

Basic Account Types:

1. Personal Accounts: Ledgers opened in the name of person or firms.
   Eg: Ram A/c, Pragathi&Co A/c, Bank A/c
2. Real Accounts: Ledgers opened in the name of Fixed/Floating Asset
   Eg: Cash A/c, Machinery A/c, Furniture A/c
3. Nominal Accounts: Ledgers opened in the name of an Expense, Loss, Income or Profit
   Eg: Salaries a/c, Received Rent a/c, Discount a/c

Debit/Credit Rules: