In plain English
Each entry has equal debits and credits. That is why the trial balance should always balance and why errors are easier to catch.
Nearly all accounting software uses it behind the scenes.
Why it matters
Double entry is what lets your books check themselves. Because every entry has two equal sides, a missing half or a wrong amount shows up as an imbalance. A single list of income and spending cannot catch that kind of error, and it cannot produce a balance sheet.
It also connects activity to position. When you pay off a loan, double entry lowers both cash and the loan balance. When you buy equipment, it moves value from cash to an asset. That is how your reports can show both how much you made and what you own and owe.
Worked example
Buying $500 of supplies with the card: debit supplies expense $500, credit credit card payable $500.
How to handle it
- Use software that records in double entry, or set up a spreadsheet with separate debit and credit columns.
- For each transaction, identify every account it touches and the amount for each.
- Confirm debits and credits are equal before posting any manual entry.
- Run a trial balance at month end to check that the ledger still balances.
- Investigate any account whose balance is on the unexpected side.
Common mistakes
- Keeping books in a single column spreadsheet and assuming it is double entry, which means there is no balance sheet and no built in error check.
- Using one side of an entry for a vague account like miscellaneous to make the entry balance, which hides what really happened.
- Posting manual entries that balance but use the wrong accounts, since equal totals do not prove correct accounts.
- Forcing a trial balance to agree with an adjustment instead of finding the cause.
Not the same as: Debit and credit
Double entry is the method of recording every transaction in at least two accounts. Debits and credits are the labels for the two sides used in that method. See Debit and credit.
Go deeper
- Double-Entry Bookkeeping Explained Simply: Learn how double-entry bookkeeping works, why every transaction touches two accounts, and how it catches errors a simple checkbook register would miss.
Related terms
- Equity: The owner's stake in the business: what is left after liabilities are subtracted from assets.
- Expense: A cost of running the business, subtracted from revenue to find profit.
- Depreciation: Spreading the cost of a long-lived asset over its useful life as an expense.
Common questions
What is double-entry bookkeeping?
A system where every transaction is recorded in at least two accounts so the books stay in balance.
Can you give an example of double-entry bookkeeping?
Buying $500 of supplies with the card: debit supplies expense $500, credit credit card payable $500.
Can a sole proprietor use single entry bookkeeping?
Some very small businesses keep a simple income and expense list. Double entry gives a balance sheet and catches more errors, and most software uses it anyway.
If my books balance, are they correct?
Not necessarily. Balanced books only prove debits equal credits. An entry posted to the wrong account or left out entirely can still balance.
General information, not tax, legal or accounting advice. Confirm rules with the IRS, the NJ Division of Taxation or a licensed professional.