Course Outline
Join PRO

What is double-entry bookkeeping?

Author:
Harold Averkamp, CPA, MBA

Definition of Double-Entry Bookkeeping

Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least two of its general ledger accounts.

At least one account will have an amount entered as a debit and at least one account will have an amount entered as a credit. Further, the total amounts entered as debits must be equal to the total amounts entered as credits. Meeting these requirements will result in the accounting or bookkeeping equation being in balance at all times.

Examples of Double-Entry Bookkeeping

Let’s assume that a company borrows $10,000 from its bank. The company’s asset account Cash is increased with a debit entry of $10,000 and the company’s liability account Loans Payable is increased with a credit entry of $10,000. If the company repays $3,000 of the amount borrowed, the company will decrease the amount in its Cash account with a credit entry of $3,000 and will reduce the balance in its Loan Payable account with a debit entry of $3,000.

If the company pays its monthly rent of $2,000, a credit entry of $2,000 will be recorded in its Cash account and a $2,000 debit entry will be recorded in its Rent Expense account.

If a company collects $500 from a customer who had previously purchased goods on credit, the company will make a debit entry of $500 in its Cash account and will make a credit entry of $500 in its asset account Accounts Receivable.

Join PRO to Track Progress

Advance Your Accounting and Bookkeeping Career

Must Watch image

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video
Certificates of Achievement

Earn Our Certificates of Achievement

Certificates of Achievement
  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Accounts Receivable and Bad Debts Expense
  • Inventory and Cost of Goods Sold
  • Depreciation
  • Payroll Accounting
View PRO Plus Features

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,866 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Bookkeeping Study Guide
Managerial Study Guide
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Accounts Receivable and Bad Debts Expense
Certificate - Inventory and Cost of Goods Sold
Certificate - Depreciation
Certificate - Payroll Accounting
Motivational Badges
Motivational Points
Medal Rankings
Activity Streaks
Custom Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 2,866 Testimonials

Take the Tour Join Pro Upgrade to Pro Plus