Two-Entry System

The Two-Entry System is an accounting method where every financial transaction affects at least two accounts, ensuring the accounting equation (Assets = Liabilities + Equity) stays balanced. For example, if you buy equipment with cash, the Equipment account increases while Cash decreases by the same amount. This system helps accurately record and track financial activities, providing a clear picture of a company's financial health. It ensures that each transaction has a dual effect, maintaining consistency and aiding in accurate financial reporting.