What is double-entry bookkeeping?

Double-entry bookkeeping is a fundamental accounting method that involves recording every financial transaction in two separate accounts. This method is based on the principle that each transaction affects at least two accounts, with one account being debited and another being credited. This dual recording system helps to maintain the accounting equation (Assets = Liabilities + Equity), ensuring that the books remain balanced.

By writing every transaction in two places, double-entry bookkeeping provides a more comprehensive view of a business's financial health. It acts as a safeguard against errors and fraud, as the entries on both sides of the ledger should always equal each other. This method not only captures the essence of the transaction but also facilitates the generation of financial statements, offering critical insights into the operational and financial status of the business.

Tallied correctly, this system allows for greater accuracy and accountability in financial reporting, making it a best practice for businesses of all sizes. While the other options might describe aspects of bookkeeping or record-keeping, they do not encapsulate the full scope or essential principles behind double-entry bookkeeping.