What is double-entry bookkeeping?

Double-entry bookkeeping is mentioned because in financial accounting, each business transaction is recorded twice.

More precisely, in a journal entry, debit is always booked to credit, and thus every business transaction is recorded twice, but on different accounts. At the same time, exactly the same amount is booked in both the debit and credit. Thus, the success of a company is demonstrated in two ways:

1. By comparing the changes in assets and liabilities in the balance sheet at the balance sheet date (=change in equity)
2. By comparing revenue to expenses for the current year in the profit and loss statement (=profit or loss)

‍Note: In double-entry bookkeeping, both the balance sheet and the profit and loss statement show a profit or a loss; this must be the same amount in the balance sheet as in the profit and loss statement! Otherwise, something is wrong in the double-entry bookkeeping (=unilateral entries)!