Double-Entry Bookkeeping

Recording every transaction twice — as a debit in one account and a credit in another.

Double-entry bookkeeping records each transaction in two accounts, so the books always balance: buy a truck with cash and assets go up (truck) while assets go down (cash). The system, codified by the Franciscan friar Luca Pacioli in 1494, makes errors and fraud visible because the two sides must always reconcile — accounting's built-in checksum. It remains the foundation of every modern accounting system, five centuries on, and made possible the balance sheet itself.

Under double-entry bookkeeping, the loan appears both as cash received and as a liability owed to the bank.