Double‑Entry Basics: Why Every Line Must Balance

Agnes Lee
12 minutes ago
2 min read

Ever wondered why accountants always talk about “debits” and “credits”? It’s not just tradition—it’s the backbone of reliable bookkeeping. At its core, double‑entry accounting means that every financial transaction affects at least two accounts and that the total debits always equal the total credits.

What is Double‑Entry Accounting?

Think of your business like a balanced scale. When you record a transaction, you’re capturing both sides of that scale:

Debit: Typically reflects what you’re receiving. For example, when you buy office supplies, you debit (increase) your expenses or assets.
Credit: Shows where the money came from. In the same office supplies example, you credit (decrease) cash or increase accounts payable if you owe your supplier.

Every transaction must keep the books in balance. If cash goes down, another asset or expense must go up by the same amount or a liability must change accordingly.

Why Does Each Line Have to Balance?

Accuracy: Balanced entries force you to record complete information. If your debits don’t equal your credits, something is missing or misclassified.
Fraud prevention: The system acts as a built‑in check. Unbalanced entries signal errors or potential tampering.
Clear financial picture: Balanced books give you accurate totals for assets, liabilities, revenue and expenses—critical for decision‑making, tax filing and securing loans.

A Simple Example

Let’s say your business pays S$1,000 for new laptops:

Debit: Equipment (Asset) +S$1,000
Credit: Cash (Asset) −S$1,000

Your assets increase by S$1,000 (the laptops) and decrease by S$1,000 (cash spent), keeping the accounting equation (Assets = Liabilities + Equity) in balance. If you bought on credit instead, you’d credit accounts payable instead of cash—still balancing the entries.

How Do ABSS/MYOB and SQL Account Help?

Modern accounting software like ABSS/MYOB and SQL Account take the mystery out of double‑entry. When you create an invoice, bill or journal entry, the system automatically posts the matching debit and credit entries in the background. You just choose the correct accounts, and the software ensures everything balances. If something doesn’t add up, it flags the discrepancy before you can proceed.