What is Double-Entry Accounting?

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What is Double-Entry Accounting?

Double-entry accounting is a method of bookkeeping in which every financial transaction is recorded in two or more accounts. This is because every financial transaction has a relationship or effect on at least two accounts.

For example, when a business gets an income, the company's cash account will increase and the sales account will also increase.

8/8/19SaleCashUSD 1,000 
  Sale USD 1,000

In the example above, the two accounts involved in this transaction are debit and credit accounts. The amount on the debit account will increase, and the amount on the credit account will decrease. And the total amount of debits and credits must always be the same.

What are debit and credit?

Every transaction in business results in a debit in one account and a credit in another. Together, it shows money coming in or going out in the business, one increasing and the other decreasing.

For example, a transaction that adds to an asset is recorded as a debit in an asset account. Then, the transaction will also be recorded on credit in another account.


What is equality in bookkeeping?

Double-entry accounting is based on the following equation:

Assets = Liability + Equity

This equation states that assets equal the sum of debt and equity, and this equation must always be the same. If the company's assets increase, the debt or equity must also increase.

Double-entry accounting software

Bookkeeping software in general, such as Swift, QuickBooksand Xero, using a double-entry system.

Double-entry accounting is used to create financial reports such as balance sheets and profit and loss. These financial statements are important for investors, creditors and other stakeholders in making decisions within the company.

Double-entry accounting is the foundation of modern bookkeeping systems and is widely used in business, government, and other organizations. This system is used to ensure that financial transactions are recorded correctly.