Double-entry bookkeeping

Every transaction recorded twice, in two places. Five hundred years old and still how it works.

What it means

Double-entry records each transaction as a debit in one account and an equal credit in another, so the books always balance.

Why it matters

It is what makes a trial balance possible and what makes errors findable. It is also why the balance sheet balances — that is arithmetic, not a sign of health.

What it looks like in practice

Modern software does the second entry for you. Coding a bank payment to "insurance" creates the debit to insurance and the credit to the bank without you seeing it.

What to watch out for

The abstraction leaks when something unusual happens — a journal, a correction, an owner's introduction of funds — and that is where miscoding causes months of confusion.

Where to get proper advice

Your accountant. This is exactly the kind of question they answer in ten minutes and most owners never ask.