Intro to accounting
Double-entry bookkeeping in 90 seconds, written for someone who's never recorded a transaction.
If you've never run a set of books, this page is the one to read first. It's short and there's no jargon-trap.
The whole idea
Bookkeeping is just a system for tracking where every dollar came from and where it went. Once you accept that every dollar has two stories ("got it from X, put it into Y"), the rest follows.
In Axerity, each story is called a transaction, and each side of the story is called a line. Every transaction has at least two lines.
The five kinds of accounts
A bucket where you track a category of money is an account. There are five kinds:
- Assets — what you own. Cash, checking account, equipment, money customers owe you.
- Liabilities — what you owe. Credit card balance, loans, money you owe vendors.
- Equity — the owner's stake in the business. What's left if you sold every asset and paid off every liability.
- Revenue — money coming in. Sales, services rendered, interest earned.
- Expenses — money going out. Rent, software subscriptions, salaries.
That's it. Every account fits in one of those five.
Debits and credits
Every line is either a debit or a credit. Same total on both sides of every transaction. The trick is knowing which side gets bigger when:
| Account type | Gets bigger with a... |
|---|---|
| Assets (cash, equipment) | Debit |
| Expenses (rent, software) | Debit |
| Liabilities (credit card, loans) | Credit |
| Equity (owner's stake) | Credit |
| Revenue (sales) | Credit |
If you remember Assets and Expenses grow with a debit, you can remember the rest by elimination — everything else grows with a credit.
A few examples
A customer pays you $100 in cash for something you sold.
- Debit Cash $100 (cash went up)
- Credit Sales Revenue $100 (revenue went up)
You pay $500 in rent.
- Debit Rent Expense $500 (an expense went up)
- Credit Cash $500 (cash went down)
You buy a $2,000 laptop on your credit card.
- Debit Equipment $2,000 (an asset went up)
- Credit Credit Card $2,000 (a liability went up)
You put $5,000 of your own money into the business.
- Debit Cash $5,000 (cash went up)
- Credit Owner's Equity $5,000 (your stake went up)
Why force the two-sided entry?
Because it catches mistakes. If the two sides don't add up, something is wrong — typically a typo or an account you forgot. The same property is why your balance sheet always balances: every dollar in an asset can be traced back to either someone's investment (equity), someone's loan (liability), or some accumulated profit (also equity, indirectly).
This is the genius of double-entry, and it's been the standard for five hundred years. It works.