Double Entry Bookkeeping

Luca Pacioli’s Summa de Arithmetica contains the first recorded description of double entry bookkeeping, a foundational tool for modern accounting practice.

In double entry bookkeeping every transaction is recorded twice to the left and right of each entry. The left-hand column is debit and the right hand column is credit.

To record a sale of $500, let’s say for a bicycle, you list it twice, once on the left as a debit in a column named “stuff I own” and once as a credit on the right in a column called “Revenue from Sales.”

Recording double entries yields a mathematical error detection tool:

Assets = Equity + Liabilities

The sum of all of the debits in the left hand column will equal the sum of all the credits in the right hand column.

The debit column in red will always provide a mathematical check on the credit column in green and vice versa.

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