Business glossary
Double-entry accounting
A bookkeeping system in which every transaction affects at least two accounts.
Example
When a customer pays a $500 outstanding invoice, cash increases by $500 and accounts receivable decreases by $500. The payment settles a receivable rather than creating another sale.
How it differs from related terms
Double-entry bookkeeping balances debit and credit entries for every transaction. A debit does not always mean an expense, and a credit does not always mean income; their effect depends on the account type.
Frequently asked questions
What is an example of double entry accounting?
When a customer pays a $500 outstanding invoice, cash increases by $500 and accounts receivable decreases by $500. The payment settles a receivable rather than creating another sale.
How should double entry accounting be interpreted?
Double-entry bookkeeping balances debit and credit entries for every transaction. A debit does not always mean an expense, and a credit does not always mean income; their effect depends on the account type.