Double-Entry Bookkeeping

A system where every transaction is recorded with equal debits and credits in at least two accounts, keeping the books in balance.

Debits increase assets and expenses; credits increase liabilities, equity and income. The opposite entries decrease them.

Debit Cash (asset up) and credit Capital (equity up).

Debit Rent Expense (expense up) and credit Cash (asset down).

Because each transaction posts equal debit and credit amounts, the sum of all debit balances must equal the sum of all credit balances.

5 question(s)

Beginner

A system where every transaction is recorded with equal debits and credits in at least two accounts, keeping the books in balance.

Every entry: total Debits = total Credits

Real-world example It underpins every accounting system, from ledgers to modern ERP software.

Beginner

Debits increase assets and expenses; credits increase liabilities, equity and income. The opposite entries decrease them.

Assets & Expenses: Dr increases
Liabilities, Equity, Income: Cr increases

Real-world example Knowing this lets you journalise any transaction correctly.

Beginner

Debit Cash (asset up) and credit Capital (equity up).

Dr Cash 5,000
   Cr Capital 5,000

Real-world example Recording the initial injection of funds when a business starts.

Intermediate

Debit Rent Expense (expense up) and credit Cash (asset down).

Dr Rent Expense 800
   Cr Cash 800

Real-world example Every operating cost paid reduces cash and records an expense.

Advanced

Because each transaction posts equal debit and credit amounts, the sum of all debit balances must equal the sum of all credit balances.

Sum(Dr) = Sum(Cr) across every account

Real-world example An out-of-balance trial balance signals a posting error to investigate.