Approaches to Recording in Accounting Transaction
There are two approaches for recording a transaction.
- Accounting Equation Approach
- Traditional Approach
Accounting Equation Approach
This approach is also called as the American Approach. Under this method transactions are recorded based on the accounting equation, i.e.,
Assets = Liabilities + Capital
This will be discussed in detail in the next chapter.
This approach is also called as the British Approach. Recording of business transactions under this method is formed on the basis of the existence of two aspects (debit and credit) in each of the transactions.
All the business transactions are recorded in the books of accounts under the ‘Double Entry System’.