double entry accounting

📘 Double-Entry Accounting

Double-entry accounting is a bookkeeping system in which every financial transaction affects at least two accounts, with equal debit and credit entries. This system ensures that the accounting equation always stays balanced:

Assets
=
Liabilities
+
Owner’s Equity
Assets=Liabilities+Owner’s Equity
🔄 Key Principles:

Every transaction has two sides:

Debit (Dr) → Left side of an account

Credit (Cr) → Right side of an account

Total Debits = Total Credits for every transaction.

Keeps books accurate and helps detect errors.

✅ Why Use Double-Entry?

Ensures accuracy

Maintains the balance sheet

Helps detect and correct mistakes

Provides a complete financial picture

Essential for auditing and reporting

📚 Example Transactions
Example 1: Invest $10,000 Capital into the Business
Account Debit Credit
Cash (Asset) 10,000
Capital 10,000

Explanation:

Cash increases (Asset) → Debit

Capital increases (Equity) → Credit

Example 2: Buy Equipment for $2,000 Cash
Account Debit Credit
Equipment (Asset) 2,000
Cash (Asset) 2,000

Explanation:

Equipment increases → Debit

Cash decreases → Credit

📊 Double-Entry Accounting Equation:
Assets
=
Liabilities
+
Equity
Assets=Liabilities+Equity

This must stay in balance after every transaction.

🧠 Account Types in Double-Entry:
Type Debit Increases Credit Increases
Assets ✅ ❌
Liabilities ❌ ✅
Equity ❌ ✅
Revenue ❌ ✅
Expenses ✅ ❌
📌 Summary:

Every transaction has two effects.

Always keep the equation balanced.

A reliable method for businesses of all sizes.