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Accounting

Double-entry accounting

Definition

The bookkeeping system in which every transaction is recorded as equal debits and credits, so the books always balance.

In double-entry accounting every transaction affects at least two accounts, and the debits equal the credits. Assets and expenses normally carry debit balances; liabilities, equity and revenue normally carry credit balances. The result is the accounting equation, which holds at every moment: assets = liabilities + equity (with this year’s revenue less expenses inside equity until year-end close).

Why it matters

Balance is a built-in error check. If debits and credits don’t match, something was recorded wrong. It also forces every dollar to have a source and a destination: cash didn’t just go down, it paid a specific payable.

Worked example

A sub’s requisition of $250,000 with 10% retainage (sample data): Dr JC – Subcontract $250,000 / Cr Accounts Payable $225,000 / Cr Retainage Payable $25,000. Debits $250,000 = credits $250,000. When you pay the $225,000: Dr Accounts Payable / Cr Cash.

Common mistakes

  • Using a suspense or “plug” account to force a balance and never clearing it.
  • Assuming balance means correct. A balanced entry can still hit the wrong job or the wrong account.

How os.construction handles it

The ledger in the accounting preview refuses unbalanced entries outright, per legal entity, and a database constraint enforces the same rule. See Accounting overview.

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