What is double entry bookkeeping

The double-entry principle, often known as double-entry bookkeeping, is widely used in financial reporting and recording and forms the structural basis of modern accounting systems.

Dating back to the 15th century, there’s a fundamental rule that each financial transaction must be recorded in at least two separate accounts. 

Double-entry bookkeeping bespeaks the verifiability of accounts by fuelling traceability where money movements are thoroughly accounted for, eliminating the possibility of funds vanishing without explanation or emerging unaccounted for. «Debit» means that an account’s balance goes up, and «credit» means it goes down.

Double-entry accounting tracks every financial transaction, helping to monitor accounts and preventing money from vanishing or showing up unexpectedly. Simply put, a «debit» increases an account’s balance, while a «credit» decreases it or shows what you owe.

The importance of an accounting software

Accounting software simplifies double-entry bookkeeping, letting users concentrate on running their businesses rather than getting tangled up in accounting details. However, it’s still important to have a good understanding of double-entry accounting basics for financial literacy.