What is Double-Entry Accounting?

Double entry accounting is used to balance the accounting equation. That is, Assets must always equal Liability + Owners Equity. As such, entering any amount on one side of the equation requires entering the same amount on the other side. This is done through double-entry accounting. 

How is Double-Entry Accounting Used? 

Double entry accounting requires that what we do one side – we need to do to the other side or we need to negate what we did to that one side.

So for each transaction at least two accounts are involved – with at least one on the debit and one on the credit side. Every time we do a transaction you’re going to have at least one debit and at least one credit. The total amount of the debits in that transaction must also equal the total amount of the credits. So, if you have one debit and one credit,  they need to be the same. If you have multiple debits and credits, the sum of all debits needs to equal the sum of all credits. 

Related Topics

• What is an Account? – Financial Accounting
• What is a T-Account? – Financial Accounting
• T-Account Rules – Financial Accounting
• What is Double-Entry Accounting – Financial Accounting
• Accounting Journal
• What are Journal Entries – Financial Accounting
• What is a Trial Balance? – Financial Accounting