10/11/2024
DOUBLE ENTRY RULE OF ACCOUNTING (A business lesson for every business owner)
Double entry principle states that for every debit entry ,there must be corresponding credit entry and vice versa. It means for every giver , there should be a receiver.
*"Give and Take" Concept*
- Every transaction has two sides: "Give" (Credit) and "Take" (Debit)
- When you "Take" something (Debit), you must also "Give" something (Credit)
- When you "Give" something (Credit), you must also "Take" something (Debit)
*Example:*
- You buy office supplies for N100
- "Take" office supplies (Debit)
- "Give" cash (Credit)
- You sell a product for N500
- "Take" cash (Debit)
- "Give" product (Credit)
Every action has an equal and opposite reaction. Here's how it translates into the business world:
Every business interacts with:
Staffs: Invest for Mutual Benefit
Investing in staff through training and development.(Give ). This increases their productivity (receive) and customer satisfaction (potential for increased revenue - receive), ultimately benefiting your business.
Customers: Loyalty is an Asset
Providing excellent customer service(give) builds customer loyalty, a valuable intangible asset. Loyal customers bring repeat business (receive) and positive word-of-mouth promotion (receive).
Vendors: Strong Relationships Matter
Maintaining positive relationships with vendors by paying on time (give) and negotiating favorable terms (potential for lower expenses). Reliable suppliers ensure a smooth supply chain (receive).
Society: Responsibility Builds Value
Acting ethically and sustainably (e.g., environmental practices, fair labor) might incur initial expenses (give). However, it builds a strong brand reputation (receive), attracting a wider customer base (receive) and potential for partnerships.
By strategically "investing" in these relationships (staff, customers, vendors, society), you create a positive feedback loop that increases profitability and overall business value.
Ps: There are user-friendly accounting software options that automate double-entry bookkeeping. If you're not comfortable with the technical aspects, consider seeking help.
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