Double-entry bookkeeping records every transaction in at least two accounts, a debit and an equal credit, so the books always stay in balance.
Every transaction affects at least two accounts. Buy $500 of supplies with cash and your supplies expense goes up by $500 (a debit) while your cash goes down by $500 (a credit). Because debits always equal credits, the accounting equation, Assets = Liabilities + Equity, stays balanced at all times.
Double-entry is the foundation of all modern accounting and every accounting software package. It is what makes a trial balance and reliable financial statements possible, and it provides a built-in error check: if debits and credits do not agree, something was recorded wrong.
You take out a $10,000 loan. Cash (an asset) increases by $10,000 as a debit, and the loan payable (a liability) increases by $10,000 as a credit. Two entries, equal and opposite, and the balance sheet still balances.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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