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Worked example
Double-entry bookkeeping, worked through a flower shop
Every transaction has two sides, and once you see why, double-entry stops being a mystery. Here it is worked step by step through the first few days of a new flower shop.
Updated August 2026 · 8 min read
Double-entry bookkeeping sounds technical, but the idea underneath it is simple: every transaction affects two things, so it is recorded in two places. Money does not appear from nowhere; if one account goes up, another goes up or down to match. Get that, and the debits and credits fall into place. Let us build it up through a new flower shop.
The accounting equation
Everything in bookkeeping rests on one equation that must always balance:
Assets = Capital + Liabilities.
Assets are what the business owns, liabilities are what it owes to others, and capital is what it owes to its owner. Every transaction keeps this equation in balance, and double-entry is simply the mechanism that makes sure it does.
The debit and credit rules
Each account has a debit side and a credit side. The rules for which side to use are worth memorising, because everything else follows from them:
Debits increase assets and expenses. Credits increase liabilities, capital and income. Every transaction has an equal debit and credit, so the two always balance.
The scenario
Petal & Stem is a brand-new flower shop. In its first few days it makes four transactions. We will record each with its debit and credit, then check the equation still balances.
Look at transaction 1: the owner's £10,000 makes the bank (an asset) go up, so it is debited, and capital (what the business owes the owner) go up, so it is credited. Transaction 2 swaps one asset for another: equipment up (debit), bank down (credit). Transaction 3 brings in an asset on credit: inventory up (debit), a liability up (credit). Transaction 4 settles part of that liability: payables down (debit), bank down (credit).
Checking the equation balances
After the four transactions, here are the balances:
Both sides come to £10,800, so the equation balances, which is the whole point of double-entry. Income and expenses work the same way: a £600 cash sale would be a debit to the bank and a credit to sales, because a credit increases income, and that income feeds into profit, which belongs to the owner as capital.
Where this comes up in ACCA
Double-entry is the foundation of Financial Accounting (FA), and the debit-and-credit thinking runs through every accounting paper after it. Getting completely comfortable with the accounting equation and the rules above early makes everything that follows, from adjustments to full financial statements, far easier.
The best way to internalise it is to record transactions until it is second nature. The free ACCA FA course on Clevernest teaches double-entry inside a real business, with instant marking as you go.
Learn double-entry free on ClevernestRecord transactions, build the accounts and prepare the statements inside a real business. The whole ACCA FA course, free forever.
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Frequently asked questions
What is double-entry bookkeeping?
Double-entry bookkeeping is the system where every transaction is recorded in two places, with an equal debit and credit, because every transaction affects two accounts. It keeps the accounting equation, assets equals capital plus liabilities, in balance at all times.
What is the difference between a debit and a credit?
Debits increase assets and expenses; credits increase liabilities, capital and income. Every transaction has an equal debit and credit, so recording both sides keeps the books balanced. Which side you use depends on the type of account and whether it is going up or down.
What is the accounting equation?
The accounting equation is assets equals capital plus liabilities. Assets are what the business owns, liabilities are what it owes to others, and capital is what it owes to the owner. Every transaction keeps this equation in balance, which is what double-entry ensures.
How do you know whether to debit or credit an account?
Identify the type of account and the direction. Assets and expenses increase with a debit and decrease with a credit; liabilities, capital and income increase with a credit and decrease with a debit. In our example, cash coming in is a debit to the bank, and the matching capital is a credit.
Where is double-entry tested in ACCA?
It is the foundation of Financial Accounting (FA), and the debit-and-credit thinking underpins every accounting paper after it, from adjustments and financial statements in FA through to Financial Reporting and beyond.