Approaches of Recording

There are two approaches for recording a transaction.

I. Accounting Equation Approach

II. Traditional Approach

I. 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.

II. Traditional Approach

This approach is also called as the British Approach. Recording of business transactions under this method are 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’.