Double-entry bookkeeping
Double-entry bookkeeping is an accounting system that records each financial transaction in two accounts: one as a debit and the other as a credit. This method ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced. For every amount added (debit), there is an equal amount subtracted (credit), which helps prevent errors and provides a complete picture of a business's financial health. It allows for more accurate tracking of income, expenses, and overall financial status, making it an essential practice for businesses of all sizes.
Additional Insights
-
Double-entry bookkeeping is an accounting method where every financial transaction is recorded in two accounts: one as a debit and the other as a credit. This system ensures that the accounting equation—assets equal liabilities plus equity—remains balanced. For example, if a business purchases equipment, it increases both its assets (equipment) and its liabilities (if financed) or reduces cash (if paid). This approach provides a complete view of a company’s financial health, helps prevent errors, and facilitates tracking of income and expenses, making it essential for accurate financial reporting and analysis.