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what is double entry bookkeeping

What is Double Entry Bookkeeping?

Starting your own business can be exciting, but managing finances can be challenging. Double entry bookkeeping is a system that can help small businesses stay on top of their finances and make informed decisions. In this blog post, we’ll explore why double entry is so important for small businesses.

What is Double Entry Bookkeeping?

It is a method of accounting that involves recording financial transactions in two accounts. Each transaction is recorded in one account as a debit and in another account as a credit, ensuring that the total debits always equal the total credits. This system ensures that every financial transaction is accurately recorded and allows businesses to track the flow of money in and out of the business.

Accuracy and Transparency with Double Entry Bookkeeping

One of the main benefits of this type of bookkeeping is that it provides a clear and accurate picture of a business’s financial health. By recording every transaction in two accounts, businesses can ensure that their books are accurate and up-to-date. This allows business owners to make informed decisions about the direction of their business, as well as to identify potential financial problems before they become major issues. Additionally, double entry bookkeeping provides transparency in financial reporting, which can be helpful in attracting investors or securing loans.

Better Decision Making

It can also help small businesses make better decisions. By having accurate and up-to-date financial records, business owners can identify trends and patterns in their financial data. This can help them make informed decisions about investments, pricing strategies, and other business decisions. Without reliable financial data, small business owners may be making decisions based on incomplete or inaccurate information, which can lead to costly mistakes.

Cost Savings

Another important benefit of double entry bookkeeping is that it can help businesses to save money. By keeping accurate records, businesses can identify areas where they are overspending and make adjustments to reduce costs. For example, if a small business owner notices that they are consistently overspending on office supplies, they can take steps to reduce their expenses in that area. Additionally, accurate financial records can help businesses to avoid costly mistakes such as overdrafts, missed payments, or tax penalties.

Compliance and Tax Reporting

It is also important for compliance and tax reporting. Accurate and up-to-date financial records are required for tax reporting and can help small businesses avoid costly mistakes. Additionally, it can help businesses to comply with regulations such as the Sarbanes-Oxley Act, which requires businesses to maintain accurate financial records and internal controls.


In conclusion, double entry bookkeeping is an essential tool for small businesses. By providing accuracy and transparency, improving decision making, and saving costs, double entry bookkeeping can help small businesses to stay on top of their finances and make informed decisions. Additionally, it can help businesses to comply with regulations and avoid costly mistakes. As a small business owner, it’s important to prioritize accurate financial record-keeping and consider implementing double entry bookkeeping as a way to achieve this goal.