Single vs. Double Entry

In the world of bookkeeping and accountancy there are two basic ways to record your accounts. They are called single entry and double entry accounting. Single entry accounting works the same way the ledger in a check book works. You write every number down one time only, as either an increase or a decrease in total funds. Single entry accounting is easy to do and perfectly adequate for very small businesses. It has the disadvantage that if a mistake in recording or figuring is made, there is nothing to check it against. Double entry accounting and cash flow management is more complicated and can seem initially confusing. In double entry accounting you write everything down twice. Computer programs do double entry automatically but if you are doing it by hand your ledger sheet will have two columns, one for credits and one for debits. Credits are negative and debits are positive.

If you are writing down the money you spend to buy a new desk chair, for instance, you will write it down under credits as decrease in your funds, and in debits as an increase of your expenses. They come out to the same thing, but this double method allows you to self-check your figures and also provides you with a more complete financial picture. Debits and credits must both come out to equal the same thing or you know that you have made a mistake somewhere, which may hopefully be remedied by checking both columns against each other. Doing double-entry accounting by hand can require a thorough understanding of bookkeeping and accountancy, or else it would be easy to enter numbers in the wrong places. These days it is much easier to purchase a software package for your computer which will allow you to enter the number just once, and place it in the appropriate debit and credit categories for you.