What is Double-Entry Accounting?

You've probably heard the saying, "Money doesn't grow on trees." It means that money must come from somewhere---it doesn't just "appear." Double-entry accounting is a method of record-keeping that lets you track just where your money comes from and where it goes.

Using double-entry means that money is never gained nor lost---it is always transferred from somewhere (a source account) to somewhere else (a destination account). In GnuCash, this transfer is known as a transaction, and each transaction requires at least two accounts.

An account in GnuCash is a record for keeping track of what you own, owe, spend or receive. For example, if you pay a phone bill with a check, money transfers from checking to the phone company. In GnuCash, this is a transaction transferring money from a checking account to a phone expense account. You probably already think of your checking account as a bank "account," but your expenses (such as phone bill) are also "accounts" in GnuCash.

This double-entry concept has been around since the 13th century, and its purpose has always been to reduce the likelihood of data-entry errors. Fortunately, GnuCash makes it a lot easier to enter transactions than it was in those early days of accounting!