The double-entry system is an accounting method where every financial transaction is recorded twice, once as a debit in one account and once as a credit in another, ensuring that the accounting equation (Assets = Liabilities

• Equity) always remains balanced

. This means each transaction has two equal and opposite effects on at least two accounts, providing a comprehensive and accurate record of money flowing into and out of a business

. Key features of the double-entry system include:

• Every transaction affects at least two accounts: one debit and one credit

• Debits increase asset and expense accounts, while credits increase liabilities, equity, and revenue accounts

• The total debits must always equal total credits, maintaining balance in the accounts

• It improves accuracy, helps detect errors, and provides a complete financial picture compared to single-entry bookkeeping

For example, if a business takes out a $5,000 loan, the cash account (an asset) is debited $5,000, and the loan payable account (a liability) is credited $5,000, reflecting both the increase in cash and the corresponding increase in debt

. This system has been foundational in accounting for centuries and is required for compliance with accounting standards like GAAP and IFRS, especially for public companies and larger businesses

. In summary, the double-entry system is a bookkeeping method that records every transaction in two accounts, ensuring the accounting equation stays balanced and providing a reliable, error-resistant way to track a business’s financial activities.