Accounting technology / Glossary / Double-entry bookkeeping

What is double-entry bookkeeping?

Definition

Double-entry bookkeeping is the method of recording every transaction in at least two accounts, with equal debits and credits. A sale on credit, for example, increases both sales and the amount customers owe. Because the two sides always match, the books stay in balance and assets always equal liabilities plus equity.

Also calleddouble-entry accountingdouble entry

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Rule: Debits equal credits
Debit increases: Assets and expenses
Credit increases: Liabilities, equity, income

How double-entry bookkeeping works

Each account has a normal side. Assets and expenses increase with debits; liabilities, equity and income increase with credits. Paying a supplier invoice of 500 debits accounts payable, reducing the liability, and credits the bank account, reducing the asset. Buying equipment for cash debits fixed assets and credits the bank. Every entry is recorded as a journal with at least one debit line and one credit line of equal total. Single-entry bookkeeping, a simple list of income and payments like a cash book, does not track assets and liabilities and cannot produce a balance sheet. Accounting software applies double entry automatically: a user enters an invoice or bank transaction, and the software posts both sides to the general ledger.

Common questions

What is the difference between a debit and a credit?+

They are the two sides of an entry, left and right. A debit increases an asset or expense account and reduces a liability, equity or income account; a credit does the opposite.

What is single-entry bookkeeping?+

Recording each transaction once, as income or a payment, in a cash book. It is simpler but does not track what the business owns and owes, so it cannot produce a balance sheet.

Does accounting software still use double entry?+

Yes. Users enter invoices, bills and bank transactions in plain terms, and the software creates the debit and credit lines in the general ledger behind the scenes.