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Financial Glossary

Double-Entry Accounting

What is Double-Entry Accounting?

Double-entry accounting is a system where every financial transaction affects two accounts, ensuring records remain balanced. Each entry involves a debit and a credit.

Double-Entry Accounting: Basics & How It Works

📋 How Does Double-Entry Accounting Work

  • Debit: Increases assets or expenses, and decreases liabilities or equity.
  • Credit: Increases liabilities, equity, or income, decreases assets.

 

Example Transaction:

When a business buys $500 of inventory with cash:

  • Debit: Inventory $500
  • Credit: Cash $500

📌 Related: Bookkeeping | Chart of Accounts

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