Double-entry Accounting

What is Double-entry Accounting?

Double-entry accounting is a bookkeeping method that requires every financial transaction to impact at least two different accounts to keep the accounting equation balanced. This approach demands that the total debits and the total credits of the transaction are equal, ensuring accuracy and consistency in financial reports.

Short Description: A bookkeeping system ensuring that each transaction impacts at least two ledger accounts, maintaining balance within the accounting equation.

• Debits and Credits: Each transaction has a debit entry recorded in one or more accounts and a corresponding credit entry in one or more accounts.
• Balance: Total debits must always equal total credits, ensuring the ledger remains balanced.
• Audit Trail: Provides detailed records of all transactions, creating a clear audit trail and reducing errors.

This system is fundamental for preparing accurate financial statements and is vital for assessing a company's financial position and performance.