What is double-entry bookkeeping? A Detailed Review

Debits, credits and the equation
Checking a transaction against the equation

Double-entry bookkeeping records every transaction in at least two accounts, with the debits equal to the credits, so the accounting equation stays in balance. OpenStax defines a double-entry accounting system as one that "requires the sum of the debits to equal the sum of the credits for each transaction." This page covers the mechanics: how a transaction moves the equation, what a normal balance is and how a T-account shows an account's balance. For how to write a journal entry, see what is a journal entry. For bookkeeping as a whole, including the trial balance, see what is bookkeeping. For setting up the accounts themselves, see what is a chart of accounts.

Billed publishes this page. Definitions are quoted from the open textbook OpenStax Principles of Accounting, Volume 1: Financial Accounting (published April 11, 2019; pages revised April 23, 2026), opened on October 30, 2026.

Debits, credits and the equation

OpenStax defines the two sides of every account:

Debit: "records financial information on the left side of each account"
Credit: "records financial information on the right side of an account"

Every entry keeps the accounting equation level. In OpenStax's words: "Remember that the accounting equation must remain balanced, and assets need to equal liabilities plus equity." Which side increases each type of account is set out in the journal entry guide.

Checking a transaction against the equation

The first step is to work out which accounts a transaction touches. OpenStax says: "We can review how each transaction would affect the basic accounting equation and the corresponding financial statements."

A transaction doesn't have to change the totals. On a customer paying an invoice, OpenStax says: "In this transaction, there was an increase to one asset (Cash) and a decrease to another asset (Accounts Receivable). This means total assets change by $0, because the increase and decrease to assets in the same amount cancel each other out."

Normal balances

OpenStax defines a normal balance as the "expected balance each account type maintains, which is the side that increases". An account's balance is the difference between its two sides, on whichever side is larger. OpenStax's example for Cash: "If there was a debit of $5,000 and a credit of $3,000 in the Cash account, we would find the difference between the two, which is $2,000 (5,000 – 3,000)." It continues: "so the Cash account has a debit balance of $2,000."

T-accounts

OpenStax defines a T-account as a "graphic representation of a general ledger account in which each account is visually split into left and right sides". Entries reach the ledger by posting: "Posting refers to the process of transferring data from the journal to the general ledger."

OpenStax adds: "It is important to understand that T-accounts are only used for illustrative purposes in a textbook, classroom, or business discussion. They are not official accounting forms. Companies will use ledgers for their official books, not T-accounts."

Sample entry: buying equipment partly on credit

The figures here are a sample, invented for this example. On May 6, a design studio buys a $1,800 printer. It pays $600 in cash and owes the supplier the other $1,200. Before the purchase, the debit balance in its Cash account is $5,000.

Journal entry, May 6:

Debit Equipment: $1,800
Credit Cash: $600
Credit Accounts Payable: $1,200

Does it balance? Debits $1,800 = credits $600 + $1,200 = $1,800.

Effect on the equation:

Assets: Equipment +$1,800, Cash −$600, so assets change by +$1,200.
Liabilities: Accounts Payable +$1,200.
Equity: no change.
+$1,200 = +$1,200 + $0, so the equation stays balanced.

Cash T-account after posting: left side $5,000, right side $600. $5,000 − $600 = a debit balance of $4,400.

Where Billed fits

The records an entry starts from come from day-to-day work. Billed's expense tracking page says: "An expense in Billed records who you paid, when, how much and which category it belongs to, with the receipt attached to the same entry." Billed's financial reporting page says: "Billed offers several built-in reports: Invoice Reports (paid, partially paid, and overdue), Expense Reports, Income vs Expense Reports, Top Selling Products, and Time Tracking Reports." Ask your accountant or bookkeeper how these records feed your ledger.

Frequently Asked Questions

What is double-entry bookkeeping?

OpenStax defines a double-entry accounting system as one that "requires the sum of the debits to equal the sum of the credits for each transaction." Each transaction is recorded in at least two accounts, so the accounting equation stays in balance.

What is a normal balance?

OpenStax defines it as the "expected balance each account type maintains, which is the side that increases".

What is a T-account?

OpenStax defines it as a "graphic representation of a general ledger account in which each account is visually split into left and right sides". It adds that T-accounts "are not official accounting forms" and that "Companies will use ledgers for their official books, not T-accounts."

How do you find an account's balance?

Work out the difference between the two sides, debits and credits. In OpenStax's Cash example, a $5,000 debit and a $3,000 credit leave "a debit balance of $2,000."

Does every transaction change the totals in the accounting equation?

No. When a customer pays an invoice, OpenStax says "total assets change by $0, because the increase and decrease to assets in the same amount cancel each other out."

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