I must be misunderstanding something when trying to research this topic because I genuinely do not understand to point of DE bookkeeping?
To me, DE shows the exact same information that single entry bookkeeping does. In single entry you have Debit (an expense) or Credit (an income) and for each purchase or income you write a single line with how much money is involved, and that number gets added or subtracted from the balance.
But from what I can tell, in DE bookkeeping, you write the exact same thing, but then you have a second line with the exact same amount in the other column. So for example if you make a purchase of $500 for books, in one line you write “Books | Debit: $500 | Balance: $XXXX” and then in a line immediately underneath it you write “Books | Credit: $500 | Balance: $XXXX” which all can be summarized in single-entry by saying “Books | -$500 | Balance: $XXXX”?
So other than maybe proof reading by “balancing the books” to make sure both columns add up to the same amount, I can’t or don’t understand if there’s any actual difference? Can anyone help?
In: Economics
“Balancing the books” as you mentioned is the point, but it’s more than just simple double checking. Accounting is all about recording the transactions of a business and reflecting what it owns, owes, and is worth. This is reflected in the fundamental equation of assets = liabilities + equity.
Businesses are all about money in and money out, and everything affects at least two accounts. If you buy something, you lose cash, but you gain an asset. If you take a loan, you gain cash, but you have a debt to repay. Double entry accounting keeps track of these transactions and their relationship and reflects it’s all equal in the end, the money and assets and debt don’t just pop out of the ether. If one side of the equation doesn’t equal the other, it means something wasn’t recorded or got screwed up.
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