Wondering What is Double Entry Accounting?

Double entry accounting is the concept behind almost every bookkeeping system. For every transaction, there is a debit and a credit. All debits and credits must add up to equal amounts in order to balance the books. This ensures error-free accounting.

In the simplest transactions, one account is debited and another account is credited. The debited and credited accounts are then reflected as income, expenses, assets, liabilities and equity on the Income Statement and the Balance Sheet.

In the past it was necessary to understand the details of the debit credit system in order to be a bookkeeper, but now most modern bookkeeping and accounting programs do the thinking for us.

Still, it is important to understand the concept behind the double entry bookkeeping and accounting system, the debit/credit, in order to be able to read financial statements and balance the books.

Two Basic Rules Regarding Debits and Credits

1) The first rule to remember regarding the double entry bookkeeping and accounting system is that debits always go on the left and credits always go on the right.

2) The second rule is that for every transaction, the total debits must add up to equal the same amount as the total credits.

Now let's go into detail about the credit vs debit.

Return from Double Entry Accounting to Stress-Free-Accounting HomePage