What is double-entry bookkeeping?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Double-entry bookkeeping is a method of recording transactions in which each one is entered in at least two accounts, as a debit and a credit of the same total. Because every entry balances, the books as a whole stay in balance, and the records build up a full set of accounts for assets, liabilities, equity, income and expenses.
Every transaction has two effects. Paying a supplier's bill lowers the bank balance and also lowers what the business owes that supplier. Recording both effects shows not only where money went, but what it was for and what is now owned or owed.
The method rests on the accounting equation: assets equal liabilities plus equity. Each balanced entry keeps that equation true, so the same records produce both the balance sheet and the profit and loss statement, and a trial balance can flag many posting errors because its debit and credit totals would no longer agree.
In Australia
business.gov.au defines double-entry bookkeeping as a method that records each transaction in two accounts, both as a debit and a credit. It separately defines single-entry bookkeeping as a method that records only one side of each transaction.
For companies, section 286 of the Corporations Act 2001 requires written financial records that correctly record and explain transactions, financial position and performance, and that would enable true and fair financial statements to be prepared and audited. The section sets out what the records must do rather than naming a bookkeeping method.
business.gov.au notes that a manual bookkeeping system uses a series of books or ledger accounts, and that accounting software can record transactions, update ledgers and prepare financial statements.
Worked example
| Account | Debit (AUD) | Credit (AUD) |
|---|---|---|
| Bank | 400.00 | |
| Accounts receivable | 1,100.00 | |
| Sales | 1,500.00 | |
| Total | 1,500.00 | 1,500.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Recording only one side of a transaction in a spreadsheet, such as the bank payment, and leaving the other account untouched.
- Choosing the account for the second side of an entry by guesswork, so similar transactions end up spread across different accounts.
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Corporations Act 2001, sections 9 and 286
Federal Register of Legislation, Office of Parliamentary Counsel. Compilation No. 149, 19 September 2026, released 19 September 2026. Checked 15 October 2026.
Based on content from the Federal Register of Legislation at 15 October 2026. For the latest information on Australian Government legislation please go to https://www.legislation.gov.au. Licence: CC BY 4.0.
- Record keeping
business.gov.au, Australian Government. Current at 15 October 2026, released 7 November 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.