Posted by: kbenoy | August 3, 2011

What does it all mean?!

Having completed my box list and started to put some catalogue information on CALM, I have been looking at the records more closely to try to understand what they mean and how I should arrange them. At first glance, most of the volumes contain what looks to me like random lists and figures but I’m sure they must be more meaningful than that. Accounting records, unlike many other archive collections, can’t be understood just by reading them. Specific knowledge is required to identify them and their role within the accounting system.

I am very grateful to Walsall Local History Centre  for allowing me to borrow a book called Historical Accounting Records – A Guide for Archivists and Researchers by R. E. Boyns, T. Boyns and J. R. Edwards. This book, although it may sound dull, has provided me with a vast amount of information on accounting systems, particularly double entry bookkeeping, and as it is aimed at archivists rather than accountants I can understand it. All explanations are made with the records in mind (with examples and pictures!) rather than accounting practice so I can easily apply the information to my collection. 

Financial Volumes from the Smith, Son and Wilkie Collection

I am intending to give you a summary of the information I have learnt but I am not an accountant so please take the following descriptions and explanations from the view of an archivist trying to get her head around accounting practices rather than an expert view!

Today I am going to look at the theory behind double entry bookkeeping and the records it produces.

All transactions in double entry bookkeeping are recorded twice, once as a credit and once as a debit. For example, if a business buys a van they would credit their cash account, which they used to pay for the vehicle and debit their asset account as their assets have increased.

Basically, the theory behind double entry bookkeeping is as follows:

Assets = Sources of Finance       


Sources of Finance = Capital + Liabilities


Assets = Capital + Liabilities

The table below shows the extended version of this equation and whether the transaction would be a debit or a credit.

Increases are debits


Increases are credits

Assets + Expenses + Drawings/Dividends


Opening Capital/Share Capital + Revenue + Liabilities

Decreases are credits


Decreases are debits





Some important definitions:

Double entry bookkeeping: An accounting system where each transaction is recorded twice, once as a credit and once as a debit

Assets: Any resource of value that can generate cash or other economic benefits

Capital: Money invested in a business to give the investor a share is capital. The capital is what remains of the assets after the liabilities have been deducted

Liabilities: General money owed due to a past transactions or arrangements

Credit: An entry recording the amount of money owed, listed on the right-hand side of a ledger

Debit: An entry recording the amount of money received, listed on the left-hand side of a ledger

As an archivist, it is important for me to understand the nature of the records and why they were created. Below is a summary of the records created using the double entry bookkeeping system and how they link together.

Double Entry Bookkeeping records summary

The transaction is first recorded by a receipt or invoice and this information is written in one of the books of prime entry. A business may have many of these books to allow similar transactions to be grouped together, including

  • Cash Books
  • Sales Day Books
  • Purchase Day Books

Books of prime entry allow analysis of the figures and may contain more detail about each transaction than later records. Each transaction is recorded in the order it occurs before being transferred into the relevant part of the double entry ledger.

Cash Book Debits Page
Cash Book Credits Page












A double entry ledger contains various accounts on different pages throughout the ledger. Each set of pages will have a title that indicates what the account relates to (this could be a name, company or a type of transaction). Accounts in ledgers are presented as ‘T’ accounts with the debits on the left and credits on the right. As with books of prime entry, there are different types of ledgers for different functions within the business including

  • Purchase Ledgers – include details of all the suppliers who have supplied goods on credit
  • Sales Ledgers – record the accounts of all the debtors and income in to the business
  • Private Ledgers – include any financial information thought to be confidential such as the Capital account or the Bank Loan account
  • Nominal Ledgers – relate to revenue and expense items such as wages, rent, heating and lighting etc.
Double Entry Ledger Page

The back of a ledger will often contain rough calculations or the Trial Balance, used to ensure the books balance before the final accounts are drawn up. Final accounts are now required by law to be published annually but this was not always the case and earlier examples of final accounts vary widely. Final accounts often include the Profit and Loss account and Balance Sheet summarising the accounts for the year.

What I have tried to explain is that double entry bookkeeping is a common form of accounting and it requires a variety of records, created at different stages in the accounting process. Each record or book contains linked information but the detail of each transaction will vary throughout the accounting process. For the accounting system of a company to be understood it is essential to retain books from all parts of the process to allow the links to be drawn and analysed.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: