Double-entry System

The double-entry system is a method of recording financial transactions where each entry has two sides: a debit and a credit. This ensures that every transaction affects at least two accounts and that the total debits always equal the total credits, maintaining the accounting equation (Assets = Liabilities + Equity). For example, if a business buys equipment with cash, it increases the equipment account (debit) and decreases the cash account (credit). This system helps keep accurate, balanced financial records, making it easier to track financial activities and identify errors.