What is Double-entry accounting?

How it works in practice

An illustrative example. A pharmacy in Pokhara buys medicines worth Rs 40,000 on credit from a distributor. Two accounts change. Stock goes up by Rs 40,000, recorded as a debit. The amount owed to the distributor goes up by Rs 40,000, recorded as a credit.

A week later the pharmacy pays the distributor Rs 40,000 from its bank account. The amount owed falls, which is a debit, and the bank balance falls, which is a credit. Across both transactions debits equal credits, and anyone reading the books can follow the stock from purchase to payment.

Each of these is one journal entry. The entries are then posted to a ledger for each account, so the distributor’s account shows the bill and the payment side by side and a nil balance.

What the equality catches, and what it misses

Because debits must equal credits, an amount typed as Rs 4,000 on one side and Rs 40,000 on the other shows up as soon as the accounts are totalled. Double entry does not catch everything. A purchase posted to the wrong supplier still balances. So does a bill recorded twice, or a bill never recorded at all. Those are found by confirming balances with customers and suppliers and by counting stock.

In Nepal

The Income Tax Act 2058 requires a business to keep records that support the income and tax it reports, and many businesses must also have their annual accounts audited. Those accounts are kept in double entry, usually by an accountant or audit firm working from the shop’s own records rather than by the owner. Which books and audit requirements apply to your business depends on its form and size, so confirm your position with the IRD or your accountant.

Kuver Books is not a double-entry ledger and has no chart of accounts or journal voucher screen. It keeps the trading records your accountant posts from, as the guide to billing software versus accounting software explains.