What is Double-entry bookkeeping?
Double-entry bookkeeping (Definition)
Double entry bookkeeping is an accounting transaction that has two sides. The balance sheet is made up of the formula that assets = liabilities + equity and the concept of using debits and credits to enter transactions to balance them. Using this formula ensures that the balance sheet will always balance because the businesses assets will always equal the liabilities plus equity. Assets are items that the business owns, cash, machinery, buildings etc. Liabilities relate to everything the business owes someone, accounts payable or long-term loans. Equity is the owners’ stake in the company, including all contributions the owner has made, plus business profits or minus business profits.