Definition
Double-entry bookkeeping is the accounting system in which every transaction is recorded in at least two accounts, with equal debits and credits, so the books always balance.
What is double-entry bookkeeping in practice?
It reflects that every transaction has two sides: buying stock on credit increases inventory and increases what you owe. Debits increase assets and expenses; credits increase liabilities, equity and income. Because each entry balances, the accounting equation (assets = liabilities + equity) always holds, and errors are easier to find.
Buying goods on credit
Example- Dr Inventory
- USD 9,000
- Cr Accounts payable
- USD 9,000
Debits equal credits
USD 9,000
Single-entry records, such as a cash book kept in a spreadsheet, can’t show the full financial position. Each balanced record is a journal entry, summed up in the trial balance.