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This is the basic concept behind double entry bookkeeping. If the debits don't equal the credits, something is not being accounted for. Example, you deposit $1,000 in the bank and record $800 in sales. Where did the other $200 come from? If someone paid off an A/R, you need to reduce the A/R or the account balance is incorrect. If it was a loan from the owner, you need to reflect that liability.
Because every action has an equal reaction .
That's just the way double-entry accounting works - if debits don't equal credits, that means an error has been made somewhere along the line and needs to be tracked down and corrected. If the debits don't equal the credits, the books are 'out of balance', any financial report generated from such a set of books is in error and meaningless.
But it's not a 'bullet-proof' test, either. Debits and credits can still equal - and there STILL could be errors on the books, but that's a different story.
accounting cycle provides the necessary procedure to establish books of accounts of each accounts like payables and receivables, fuel consumption and maintenance, and so forth as the need arises in its determination and for management information and guidance in decision making. accounting provides the necessary information for management to fully understand the entire operation. production, sales, marketing designs and promotions provides some of the few main ingredients for a successful business venture. to balance the accounts on debits and credits provides a clear picture of a well balance and strong business operations . the periodic trial balance and balance sheet provides the assurance of a favorable financial conditions of the organization
IN EVERY COMPANY THE FINANCE DEPT USES DOUBLE ENTRY SYSTEM THATS EACH DEBIT & CREDIT AMOUNT ARE EQUAL AMOUNT FROM ORIGION OF ACCOUNTS TO ENDS OF FINANCIAL PERIOD ENDS
