What’s the big deal about double-entry bookkeeping?


Accountancy is the language of business. Not always the language of macro-economics which is why that can go haywire, but of business it is. It is the way in which we keep things making sense and not having assets and liabilities which correspond to nothing but someone’s desire that they should be there, with no basis in fact.

If accountancy is our common language and logic in business, then the principles of double entry are like the grammar of that language. Sure, small businesses can get by on a simple cashbook or other prime-entry book but this doesn’t enable these business to draw up proper balance sheets or profit and loss accounts based on accounting language. You can’t make accruals and prepayments in a cash book.

So the simple single-entry language is like a language with no verbs, like baby language in business. And when the business grows to a certain size it cannot do its thinking properly without proper statements and these statements require double-entry bookkeeping to be drawn up.

Once a person has mastered double entry bookkeeping, it enables him or her to be able to assess the consequences of a transaction or an accounting treatment more easily, on the back on an envelope, in a spreadsheet or just in their head. Those business lawyers, tax advisers and others who miss the step of learning double entry usually show themselves up when they are in a room with such as are familiar with and fluent in this language.

The best that you can do is take a simple bookkeeping book and work through it, at first, but the penny is only likely to drop when you have done a few sets of books in real life. This is usually done close to the start of one’s career. Setting some time aside to spend a year or at least six months in a bookkeeping department is time well invested for the rest of one’s career, like learning to touch type or getting your driving licence under your belt early on.

The call to action here, if you want one, is not to skip it if you are early in your career or still studying, not to assume computers will take care of it and therefore you don’t need to understand it. If you are already advanced and feel bad that you missed it, then not only are there books but also courses in LinkedIn for premium members which can help put that right. Or there is night school in the town where you live, which may be the best of all if you live somewhere other than the UK or USA whose atypical systems dominate the approach books tend to take on the topic.

Your thoughts welcome, go ahead:

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.