Double Entry Bookkeeping

Double entry bookkeeping requires that each accounting transaction have at least two financial impacts. In other words, each transaction is entered twice in the books, affecting at least one account as a debit and at least one account as a credit.

It's all about finding a credit for every debit. In other words, a decrease in one debit account will offset an increase in another debit account, or a decrease in one credit account to offset an increase in another credit account. For each transaction, the off-setting amounts must be equal, which means that the books will balance if everything is recorded accurately. In the end result, the total of all entries is zero.

The debits and credits line up like this:

Debit Credit
Assets Liabilities
  Proprietor's Equity
Expense Income

 

A "debit" is an increase in assets and expenses and a decrease in liabilities, equity and income. Conversely a "credit" is an increase in liabilities, equity and income and a decrease in assets and expenses.