Double Entry Bookkeeping System Explained

The double entry bookkeeping system is a method of accounting where every financial transaction affects at least two accounts. It works on the basic principle that for every debit, there must be an equal credit. This system helps maintain a complete and balanced record of all transactions. For example, if a business buys office supplies with cash, the supplies account increases (debit) while the cash account decreases (credit). This method reduces errors, provides a clear picture of a company’s financial position, and is widely used in businesses of all sizes. It supports the creation of accurate financial statements and ensures that the accounting equation—assets equal liabilities plus equity—always stays balanced.

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