Lesson Summary

Double entry Accounting is a method of recording transactions that involves two entries for each transaction: one (in most cases) for the balance sheet impact and one for the specific account affected (e.g., revenue, equity, loan payable). In contrast to single entry accounting, which only shows the cash movement, double entry accounting provides a more comprehensive view of a business's financial activities.

Essentially, every business transaction has a dual effect, following the principle of action and reaction. For instance, if a company spends $5,000 on computers, the cash account decreases (action), while the computer asset account increases (reaction) by an equal amount. This illustrates the balance and completeness of double entry accounting.