← Bookkeeping & Accounting VA Lesson 2 of 6 · ~5 min

Double-entry without the textbook

Double-entry in one sitting, no textbook

Every accounting course starts by drowning you in definitions. Skip that. Here's the entire system in two sentences: every transaction touches at least two accounts (money never appears or disappears — it always comes from somewhere and goes to somewhere), and the two sides must always balance. That's it. Debits and credits aren't good and bad, plus and minus, or anything moral — they're just the left and right side of that two-way record.

Key idea: If you can answer "where did the money come from, and where did it go?" for any transaction, you already understand double-entry. The rest is vocabulary.

The five account types — the only taxonomy you need

Type	What it holds	Examples	Debit does	Credit does
Assets	What the business owns	Cash, bank accounts, equipment, money owed to you (AR)	Increases	Decreases
Liabilities	What it owes	Credit cards, loans, unpaid bills (AP)	Decreases	Increases
Equity	The owner's stake	Owner investment, retained earnings, draws	Decreases	Increases
Income	Money earned	Sales, service revenue	Decreases	Increases
Expenses	Money spent to operate	Rent, software, payroll, fuel	Increases	Decreases

The pattern to memorize: debits increase what you own and what you spend (assets, expenses); credits increase what you owe, what you earned, and the owner's stake (liabilities, income, equity). Everything balances through the master equation: Assets = Liabilities + Equity.

Watch one transaction move through the system

Your client Sarah runs a landscaping company. A customer pays her $1,200 invoice today. Two questions: where did money come from? A customer debt that existed (Accounts Receivable — an asset). Where did it go? The bank (Cash — also an asset).

Debit: Cash +$1,200An asset increased — cash landed in the bank. Debits increase assets.

Credit: Accounts Receivable −$1,200Another asset decreased — the customer no longer owes it. Credits decrease assets.

Check the balance$1,200 debit = $1,200 credit. The books stay true, and note: no income was recorded today — the income was booked when the invoice was sent. Today only the shape of the asset changed, from "owed to us" to "in the bank."

One more: Sarah buys a $300 mower blade set on the business credit card. Debit Equipment Expense $300 (expenses increase with debits), credit Credit Card Payable $300 (a liability grew). From what she owns/spends: +$300 spent. From what she owes: +$300 owed. Balanced.

The chart of accounts: the filing system for all of it

The chart of accounts (COA) is just the master list of every account a business uses, conventionally numbered: 1000s assets, 2000s liabilities, 3000s equity, 4000s income, 5000s+ expenses. A good COA is small and boring — 40 to 80 accounts for most small businesses, each name so clear a stranger files correctly ("Fuel — Vehicles," not "Misc Auto Stuff"). A bloated COA with twelve overlapping expense accounts ("Supplies," "Office Supplies," "Supplies — Other") is the #1 mess you'll inherit from DIY clients, and cleaning one up is a billable specialty you'll learn in Lesson 4.

Pro move: When categorizing, don't ask "what account feels right?" Ask "which account would make this client's CPA nod at tax time?" Consistency beats cleverness — the same vendor should land in the same account every month, forever.

Cash vs accrual — the one distinction clients will quiz you on

Cash basis: income when money arrives, expense when money leaves. Simple; many small US businesses run on it. Accrual basis: income when earned (invoice sent), expense when incurred (bill received) — regardless of when cash moves. Sarah's paid invoice above was accrual logic in action. You don't choose the basis — the client and their CPA already did. Your job is knowing which one you're operating under, because it changes when you record things, and mixing the two inside one set of books is a classic DIY disaster you'll be paid to untangle.

Do this now

Journalize eight transactions by hand — paper or a doc, two columns, debit and credit, with the account type in parentheses. Sarah's landscaping company: (1) owner deposits ₱-equivalent $5,000 to start the business; (2) buys a $1,800 mower with the business debit card; (3) sends a customer a $950 invoice; (4) that customer pays it two weeks later; (5) pays $400 office rent; (6) buys $120 fuel on the company credit card; (7) pays the credit card bill; (8) owner takes a $500 draw. For each: which two accounts, which side, does it balance? Check yourself against the five-type table above. If all eight balance and you can say each one out loud in the "came from / went to" form, you've cleared the concept most applicants never do — save the sheet as proof of work. 25 minutes.

Tip: use your ← → arrow keys.