Double Entry

Double-entry bookkeeping is an accounting system based on the principle that every financial transaction has equal and opposite effects.

 The Fundamental Equation

The entire system is built upon the Accounting Equation:

Assets = Liabilities+ Equity

• Assets: What the business owns (cash, stock, equipment).

• Liabilities: What the business owes to others (loans, unpaid bills).

• Equity: The owner's remaining stake in the business after all debts are paid.

For the equation to remain true, every entry must be balanced. If an asset increases, either another asset must decrease, or a liability/equity must increase.

 Debits and Credits

In double-entry, transactions are recorded using Debits (Dr) and Credits (Cr).