ELI5: double entry bookkeeping in depth

What is double-entry bookkeeping?

Double-entry bookkeeping means that every time you spend or earn money, you write it down twice in your accounting records [2]. Think of it like a seesaw - when something goes up on one side, something else goes down on the other side to keep things balanced [1].

Why do we write things down twice?

Every business transaction affects at least two different accounts [5]. For example, when you buy supplies with cash, your supplies account goes up (you have more supplies) but your cash account goes down (you spent money) [3].

How does it help catch mistakes?

Because everything is entered twice, accountants can check if the two sides balance [1]. If they don't match, you know something went wrong and you can find and fix the error [1].

What's the basic rule?

The accounting equation is: Assets = Liabilities + Owner's Equity [4]. Every transaction you record must keep this equation balanced, which is why you always need two entries [5].