What is double-entry bookkeeping?
Short answer
Double-entry bookkeeping records every transaction twice: once as a debit in one account and once as a credit in another, for the same amount. This keeps the accounting equation in balance: assets = liabilities + capital. Debit entries go on the left of an account, credit entries on the right.
Step by step
- Identify the two accounts affected by the transaction.
- Decide which account receives value (debit) and which gives value (credit).
- Assets and expenses increase on the debit side.
- Liabilities, capital and income increase on the credit side.
- Record both entries with the same amount and date.
Worked example
A business buys equipment for $500 cash
- Equipment (asset) increases: debit Equipment $500
- Cash (asset) decreases: credit Cash $500
- Total debits = total credits = $500
Common mistakes
- Recording only one side of a transaction.
- Treating debit as always bad and credit as always good.
- Confusing the business with the owner. Money the owner puts in is capital, a credit.
Useful for:WAECGCSEA LevelMatricKCSE
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