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Double-entry Accounting: Definition and Meaning
Definition
Double-entry accounting is a bookkeeping system in which every transaction affects at least two accounts and total debits equal total credits.
Why It Matters
This system provides internal consistency and supports the preparation of financial statements. It creates a record of how one transaction affects multiple parts of the business—for example, cash, revenue, debt, expense, or inventory.
A balanced set of debits and credits does not prove that every transaction is correct, but it is a fundamental control within an accounting system.
Example
When a business buys equipment with cash, it debits the equipment asset account and credits the cash account.
Related Terms
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