Double-Entry Bookkeeping
Double-entry bookkeeping is an accounting system in which each transaction affects at least two accounts. The entries are designed to keep the accounting equation—assets = liabilities + equity—in balance.
Reviewed September 2026
Why two entries are needed
A transaction changes more than one part of a business’s financial records. Buying equipment for cash, for example, increases equipment while decreasing cash. Both effects must be recorded.
Simple example
A company buys $5,000 of equipment with cash. It records a $5,000 increase in the equipment asset and a $5,000 decrease in cash. Total assets do not change, but their composition does.
Debits and credits
Debits and credits are the two sides of the accounting entry. Whether a debit increases or decreases an account depends on the account type. The key rule is that total debits must equal total credits for each journal entry.
Why it matters
Double-entry bookkeeping creates a built-in consistency check and supports the preparation of financial statements such as the balance sheet and income statement.