Double-entry bookkeeping is the foundation of modern accounting. Every transaction affects at least two accounts — one debited and one credited — so the books always balance.
This guide explains the concept, the golden rules of debit and credit, and the accounting equation.
What is double-entry bookkeeping?
In double-entry bookkeeping, for every debit there is an equal and opposite credit. This dual effect keeps the accounting equation — Assets = Liabilities + Equity — always in balance.
It gives a complete picture of each transaction and makes errors easier to detect.
The golden rules of accounting
- Personal accounts: Debit the receiver, credit the giver
- Real accounts: Debit what comes in, credit what goes out
- Nominal accounts: Debit all expenses and losses, credit all incomes and gains
Example
Frequently asked questions
What is the accounting equation?
Assets = Liabilities + Equity. Double-entry keeps this equation balanced after every transaction.
Why is it called double-entry?
Because each transaction is recorded twice — once as a debit and once as a credit of equal amount.