What is the point and purpose of double-entry bookkeeping?

Question

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

Answer 1

fraud and mistake prevention mostly. If an insider pocket some extra dime or undercharge for some service, it will show up in the book.