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Depending on whetherthe account wasfor a customer or acreditor, all the increaseswere recorded in onecolumn of an accountand all the decreasesin the other.That made it easier to totalup and get the net balancein those accounts.When combined with the conceptof the accounting equation,this practice becamethe foundationof double entryaccounting, whichhas been adopted andused throughout the worldfor over four centuries.The entries in the left columnsof the ledger are debits,and entries in theright are credits.The Reflection below, like many others that follow, requires you to use your own ideas in your own words. Try not to turn to outside resources to find one single correct answer. If you feel that you must use the internet, make sure to cite all your sources in order to comply with the HBS Online Honor Code. Still, remember that the quotedcontent should only be in support of your own thoughts and analysis. Why do you think double entry accounting arose in Medieval Italy when it did?
How do you think accounting systems have changed in the centuries since then?How do you think technology may change accounting systems in the coming years?
2.1.3 Journal EntriesOn June 1, 2013,Cardullo's gourmet shopbought five cases ofcrunchy candy barsas inventory from a supplierfor a total price of $135and paid in cash.Crunchie candy bar is probablyone of our best selling items.And it's also nearand dear to my heart.It's one of myfavorites in the shop.It's a toffee center.It's a candy bar that wascreated in the '40s by Cadbury.And it is literally one of ourbest selling chocolate bars.It's made with milkchocolate not the dark,and it has thatwonderful toffee centerthat I talked about earlier.We purchased thosefor $0.75 a unit,and we retail them for $1.99.In the case pack is 36.
I probably purchased atleast four to five casesevery month becausethat's how many we sell.Cardullo's will need toincrease its assets $135to show the increase ininventory and decreaseassets $135 to show thepayment to the vendor.Every transaction affectsthe accounting equationand can be visualizedas a journal entry.Journal entries followa very specific format.And for Cardullo'sthe journal entryto record the purchase of fivecases of Crunchie candy barswould look like this.Let's look closely at eachpart of this journal entry.One thing you should noticeis the names of the accounts.In this case,inventory and cash.These are the accounts impactedby the purchase of the candybars.You'll also notice thatthere are two columns--one titled debit andthe other credit.
Remember, debits on the leftand credits on the right.The debit or credit columnindicates whether the accountshould be increased or decreasedas a result of the transaction.