Double entry

Double entry is a system of accounting where each financial transaction is recorded twice in two different accounts, with a debit on one side and a credit on the other. It is the most widely-used accounting system and has been in use for centuries.

Double entry relies on the accounting equation, which states that assets = liabilities + equity. This equation must be maintained after each transaction is recorded. A debit affects the asset side of the equation while a credit affects the liabilities and equity portion. This way, the two entries must reconcile to maintain the integrity of the accounting system.

Double entry is used for both businesses and individuals. It helps to ensure accuracy and consistency when tracking financial transactions, as well as providing important data such as which accounts are losing or gaining money over time.

Other accounting methods, such as single-entry accounting, do not provide the same level of accuracy and security as double entry. With single entry, all financial transactions are recorded in one general ledger, without any debits or credits to complete the equation. This is much less secure, as errors can easily go unnoticed or not be tracked back to their source.

In modern times, double entry is often conducted digitally with accounting software or spreadsheets. This digital data can then be stored securely, tracked, and shared across teams and departments. It can also be used for more complex accounting such as international transactions and business analysis, among many other tasks.

In short, double entry is an important, tried and tested accounting system for both businesses and individuals. It is a necessary tool for maintaining accurate financial records and keeping businesses on the right track for growth.