Double Entry

Think of it like a seesaw in accounting!

Double-entry bookkeeping just means that every single financial activity your business does affects at least two different accounts. It's like for every action, there's an equal and opposite reaction.

Why do we do this? It's all about keeping things balanced and accurate.

Imagine you get $100 cash for selling something.

* One side of the seesaw goes up: Your cash account (an asset) increases by $100. We record this increase with something called a debit.

* The other side of the seesaw also goes up: Your sales revenue (part of owner's equity) also increases by $100. We record this increase with something called a credit.

See? Two accounts are affected, and the total debits ($100) equal the total credits ($100). The seesaw stays balanced!

The basic accounting equation is like the rule for this seesaw:

Assets = Liabilities + Owner's Equity

* Assets are things your business owns (like cash, equipment, buildings).

* Liabilities are what your business owes to others (like loans, bills).

* Owner's Equity is the owner's stake in the business.

Here's the simple rule for how debits and credits affect these accounts:

| Account Type | Increases are recorded by | Decreases are recorded by |

|---|---|---|

| Asset accounts | Debits | Credits |

| Liability accounts | Credits | Debits |

| Owner's Equity accounts | Credits | Debits |

So, in a nutshell:

* Every financial event has two sides.

* We use debits and credits to record these changes.

* Debits increase assets, while credits increase liabilities and owner's equity.

* The total debits must always equal the total credits to keep the accounting equation balanced.

*Expense account increase are recoded in debit and decrease credits

*Revenue account increase are recorded in credit and decrease in debit