When the business accounting concepts are recorded in two accounts simultaneously, it is called double-entry accounting. The same concept goes for the accounting equation. 

The two entries in a double-entry accounting are

Debit

Credit

What is the idea behind the double-entry system?

As we already know, the double-entry system records transactions in two accounts, debit and credit. The idea is very clear that someone’s income is another person’s expenditure and someone’s loss is another one’s loss. Thus, debit and credit balances the transaction. The double entry rule says that debit and credit should always be equal as an individual transaction and also as a subtotal.    

The modern bookkeeping accounting concept is based on the two parties’ double-entry concept. For example, if a company takes out a loan from the bank, the company will have to pay the loan in the future, becomes a liability for the company, and the bank will get money in the future, which becomes an asset for the bank. Thus, it is affecting asset as well as liability accounts of different individuals. 

How does double-entry bookkeeping work?

The double-entry bookkeeping method in accounting is highly associative of balance that illustrates a very clear picture of accounting events, transactions and the company’s financial position. 

The accounting equation that makes the foundation of double-entry accounting is Assets = Liabilities + shareholder’s equity, and double-entry is based on it. 

The various back-office bookkeeping accounts based on double-entry include:

• Journal Entries
• Cash Book
• Ledger Accounts
• Trial Balance

Different types of accounts:

Asset account: The company’s property in terms of cash, equipment and relatable goods are the company’s assets.  

Liability account: Whatever equipment, goods, credit card balance, building mortgage and other resources that the company owes to its suppliers are termed liabilities. These are termed liability and not an expense because they are subject to payment to be made later.

Capital accounts: All the shareholder’s equity, common stock, and retained earnings fall under capital accounts.

Expense account: All the paments subject to business production and operational cost constitute the expense account.

Income account: All the receipts under the business name received from various sources make up the receipt account. 

Summary

One of the fundamental concepts of bookkeeping accounting is double entry.

There needs to be a corresponding entry for every entry in double-entry bookkeeping. It might be in one or more accounts.

The double-entry bookkeeping ensures balance ascertaining the real financial position of the company.  

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