Most businesses usually start with manual accounting systems. The manual system can be both informal and formal. The informal approach is one used mainly in mom and pop businesses or in small sole trader businesses. It may involve using the back of envelope to using pieces of paper which are properly documented and filed. As the business grows, the owners may graduate to an Excel spreadsheet and usually they keep cash receipts and a payments worksheet which shows inflows and outflows from the business. Usually the records kept on Excel spreadsheets are prepared using a single entry accounting system.
As the business continues to grow and as it spends more time on accounting it sees the need to migrate from manual systems to a computerised accounting system. Computerised accounting systems are programmed to automatically do double entry and to check for errors. When the double entry is incomplete it is impossible to post the transactions to the ledger if the system is computerised. The double entry system dictates that every business transaction creates two accounting entries, once as a debit and once as a credit.