Double-Entry Bookkeeping
Definition:Double-entry bookkeeping is a method of accounting where every financial transaction is recorded in two different accounts: one account is debited (meaning money is taken out or an expense is recorded), and another account is credited (meaning money is added or income is recorded). This helps ensure that the accounting equation (Assets = Liabilities + Equity) always stays balanced.
Usage Instructions: When you're keeping track of money in a business, you will use double-entry bookkeeping to make sure that every time money moves in or out, you record it in two places. This method helps to prevent mistakes and provides a complete picture of a company's financial situation.
Example:Imagine a small bakery sells a cake for $20. In double-entry bookkeeping: - You would debit (subtract) $20 from the Cash account because the bakery received money. - You would credit (add) $20 to the Sales Revenue account because the bakery made a sale.
Advanced Usage: In larger businesses, double-entry bookkeeping is essential for preparing financial statements like balance sheets and income statements. It allows accountants to analyze financial data with greater accuracy.
Word Variants: - Bookkeeping (noun): The act of recording financial transactions. - Bookkeeper (noun): A person who keeps the financial records.
Different Meanings:While "double-entry bookkeeping" specifically refers to the accounting method, "bookkeeping" can refer to the overall process of recording financial transactions, which can be done using different methods (like single-entry bookkeeping).
Synonyms: - Double-entry accounting - Double-entry system
Idioms and Phrasal Verbs:There aren’t specific idioms or phrasal verbs that directly relate to double-entry bookkeeping, but here are some phrases often used in accounting: - "Keep the books" means to maintain financial records. - "Balance the books" means to ensure that all accounts are accurate and that debits match credits.