Double Entry

Loading the player...

What is 'Double Entry'

Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, whereby each entry is recorded so as to maintain the relationship.

BREAKING DOWN 'Double Entry'

In the double entry system, transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to accurately prepare financial statements directly from the books of account and detect errors.

RELATED TERMS
  1. Debit

    An accounting entry that results in either an increase in assets ...
  2. Blind Entry

    An accounting entry found in financial bookkeeping that is made ...
  3. Account Activity

    A banking term that refers to any activity that creates a debit ...
  4. General Ledger

    A company's main accounting records. A general ledger is a complete ...
  5. T-Account

    An informal term for a set of financial records that use double-entry ...
  6. Closing Entry

    A journal entry made at the end of the accounting period. The ...
Related Articles
  1. Economics

    Explaining Double Entry Accounting

    Double entry is an accounting and bookkeeping term describing the method of entering transactions into the accounting records.
  2. Economics

    What Does Debit Mean?

    Debit is an accounting term used to refer to the left side of an accounting journal entry. Each debit must be offset by an equal credit entry.
  3. Forex Education

    Accounting Basics: The Accounting Process

    By Bob Schneider As implied earlier, today's electronic accounting systems tend to obscure the traditional forms of the accounting cycle. Nevertheless, the same basic process that bookkeepers ...
  4. Professionals

    Career Advice: Accounting Vs. Bookkeeping

    Learn the nuances that separate the similar careers of accounting and bookkeeping, and identify which is better for you based on your skills and career goals.
  5. Forex Education

    Accounting Basics: The Basics

    By Bob Schneider The Difference Between Accounting and Bookkeeping Bookkeeping is an unglamorous but essential part of accounting. It is the recording of all the economic activity of an organization ...
  6. Professionals

    Financial History: The Evolution Of Accounting

    Follow accounting from its roots in ancient times to the profession we now depend on.
  7. Budgeting

    Do I Need A Personal Accountant?

    You know you need to keep your personal finances better organized. Should you hire professional help, and if so what kind?
  8. Investing

    How to Make a Closing Entry

    Observe the following procedure for making closing entries.
  9. Economics

    Understanding the Accounting Cycle

    An accounting cycle consists of the traditional procedures performed to record business events and transactions in a company’s accounting records.
  10. Investing

    What's a Trial Balance?

    A trial balance is a worksheet listing the debit or credit balances of all the ledger accounts for an entity. Under accounting theory, the total of all the debits must equal the total of all ...
RELATED FAQS
  1. What is double entry bookkeeping and how does it work in the general ledger?

    Learn about the double entry method of bookkeeping and how it works in the general ledger. Every accounting transaction has ... Read Answer >>
  2. Given a good bookkeeping system, would financial accounting be necessary?

    Bookkeeping and financial accounting may seem like they are new creations, but variations have been around for millennia. ... Read Answer >>
  3. How can I use Excel as my business's general ledger?

    Follow these steps to set up a general ledger accounting system in Excel. A small business can use Excel as a substitute ... Read Answer >>
  4. How do you calculate credits and debits in the general ledger?

    Know the key points when balancing a ledger and why it's essential to understand the relationship between credits and debits ... Read Answer >>
  5. You are analyzing a small company's financials, and notice that the bookkeeper made ...

    The best answer is 2. 1 is tempting, but wrong, because an asset "sounds like" a debit but the depreciation expense here ... Read Answer >>
  6. What happens when my bank account is debited?

    Understand the process that takes place when your account is debited. A debit to your account happens when you use funds ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center