Double Entry Accounting

Double Entry Accounting is a bookkeeping term describing the method of any transactions into accounting records, entries are made into accounting records as debits and credits. Each accounting entry will adjust one account and have an equal but opposite effect on another account so that the debit account is always equal to the credit account.

 

Why is Double Entry Accounting important?

 

Double-entry booking provides a detailed look at a firm’s financial position, unlike single-entry bookkeeping. One of the main reasons for this is because double-entry bookkeeping implements the matching principle. The matching principle uses accrual accounting rules to record revenue and the expenses related to revenue. Recording both revenue and expenses provide an accurate calculation of profits and losses. Profits and losses are represented on the income statement, which includes accounts calculated directly from the entries made in double-entry bookkeeping.