Double Entry

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DEFINITION of 'Double Entry'

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.

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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.

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RELATED FAQS
  1. What is the best software for calculating trial balances?

    Trial balance software is used to generate reports comparing the total debits and total credits in a double entry book keeping ... Read Full Answer >>
  2. What's the difference between a trial balance and an adjusted trial balance?

    A trial balance is a simple accounting report that gives a picture of a business at periodic intervals, such as monthly or ... Read Full Answer >>
  3. Is a deficit in the balance of payments a bad thing?

    First, it's important to distinguish between the balance of payments and the current account. When the terms "trade deficit" ... Read Full Answer >>
  4. What's the difference between the general ledger and a general journal?

    The difference between a general ledger and the general journal is that the general journal is considered the initial book ... Read Full Answer >>
  5. How can I use Excel as my business's general ledger?

    For a small business with few transactions, a savvy business owner can use Excel as a substitute for accounting software. ... Read Full Answer >>
  6. What is double entry bookkeeping and how does it work in the general ledger?

    Double entry bookkeeping is the concept that every accounting transaction has two affects on a company’s finances. The general ... Read Full Answer >>
  7. How does accrual accounting differ from cash basis accounting?

    The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. ... Read Full Answer >>
  8. Does the balance sheet always balance?

    Yes, a balance sheet should always balance. The name "balance sheet" is based on the fact that assets will equal liabilities ... Read Full Answer >>
  9. 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 Full Answer >>
  10. Why do accountants use debits and credits instead of simple pluses and minuses? Why ...

    Debits and credits, and the technique of double-entry accounting, are credited (no pun intended) to a Franciscan monk by ... Read Full Answer >>

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