Double Entry Bookkeeping System Defined

Cite this article as:"Double Entry Bookkeeping System Defined," in The Business Professor, updated November 24, 2018, last accessed October 22, 2020, https://thebusinessprofessor.com/lesson/double-entry-bookkeeping-system-defined/.

Back to: ACCOUNTING, TAX, & REPORTING

Double Entry Bookkeeping Defined

It is a type of bookkeeping and accounting practice where every transaction is recorded twice in the account book, once as the debit and again as credit. The total debit account and the total credit account should be equal if all the entries are correctly made. This system allows for a constant balancing of accounts.

A Little More on the Double Entry Bookkeeping System

Double entry bookkeeping is the norm worldwide, except for in very small and cash-transaction based firms. It is an effective practice for maintaining an accurate financial statement and detecting the errors becomes easier with this practice. It was invented by the Venice Merchants in the 13th century, later Italian monk Luca Pacioli formalized it in his book ‘Summa de Arithmetica, Geometrica, Poroportioni et Proportionaltie.’

Debit and credit are two essential components of double entry. In accounting, the debit accounts are recorded at the left-hand side of the account ledger and the credit accounts are recorded at the right-hand side of an account ledger. The sum of debit must be equal to the sum of credit. This accounting method asserts the dual nature of every financial transaction, the source, and the disposition.

It satisfies the equation Assets = Liabilities + Owner’s Equity.

References for Double-Entry Accounting

Academic Research on Double Entry Bookkeeping

Was this article helpful?