ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Accounting Part 4: Double-Sided Accounting

Updated on March 19, 2011

In this section I will discuss what is known as double-sided accounting. This is the fundamental way to populate your accounting records with transaction activity. From there you will be able to publish financial statements (as discussed in earlier sections) and perform any type of analysis that you deem necessary.

I'm going to start with an example in order to provide my way of recording entries using the double-sided method. Let's say you start your own business and open a checking account by depositing $1,000 which you borrowed from the bank. How do you code this on your books? Well you should ask yourself two questions: "What do I have and how did I get it?" The answer is you have cash so that means you have an asset because it has value. How did you get it? You borrowed it and since you know you have to pay it back then it means there is a claim on that asset meaning you have a liability. So on your books you would enter $1,000 for cash and $1,000 for a liability. In this way a person reviewing your books would see that while you have $1,000 in the bank you also owe this entire amount to a lender. This is how double-sided accounting works. It identifies not only the type of asset, it also identifies the source of the asset which helps identify how it should be classified.

Now let's say you provided consulting services to someone and charged them $1,000 which they pay to your company by check. Again we ask, "What do I have and how did I get it?" The answer is you have cash so you have an asset. How did you get it? You made a sale by providing consulting services so you book this cash as sales revenue which hits your income statement account.

Now there may be some real accountants reading this and they are thinking, "What about the pluses and minuses?" In other words, do you book the transactions as positive numbers or negative numbers or what? Well, I'll get to that in the next section because for now I just want to discuss the technique of correctly classifying your transactions.

How about another example? But this time it will be from the payment side of the ledger. Say you want to pay yourself a salary and you've decided you want that $1,000 you have from your consulting services sale; how should you book it? Well since the records are for your company you have to look at it like this: the company writes you a check for $1,000. So "what do I have and how did I get it" turns into "what did I do and why did I do it?" In this instance you paid $1,000 to an employee (Yourself!) so you would subtract from your cash balance of $2,000 leaving you with $1,000. Now you ask yourself "why did I do that" and you know you paid a salary to your employee so this becomes salary expense which goes on your income statement because salaries are a deductible expense.

There are probably a million questions in your mind (like how do I figure out what is a balance sheet account or an income statement account) but the point here is to think like an accountant which is to say you have to identify the characteristics of any transaction.

Another way to look at money you have received is to ask if you have to pay it back or not. If so, then you have cash and a liability. If you don't have to pay it back then you have cash and a sale (unless it's a refund of some sort but there are many examples of cash receipts and I'm trying to keep it simple). So... do you get to keep it or do you have to pay it back? That's the question.

It's the same with a payment. Do they get to keep it or do they have to pay you back? If they have to pay you back then you have lowered your cash by the amount you paid but you book a receivable for the same amount which is an asset because it has value to your company. If they don't have to pay you back (such as an employee being paid a salary) then you lower cash and book an expense to the income statement.

Hopefully this made some sense and if you read it several times and think about simple, common transactions you will see how asking these questions will help determine how to book your entries. I will cover this further in the next installment where I will talk about debits and credits (the pluses and minuses).

Previous installment:

Accounting Part 3: Account Classification


    0 of 8192 characters used
    Post Comment

    • The Suburban Poet profile imageAUTHOR

      Mark Lecuona 

      6 years ago from Austin, Texas

      @nayaz - Thank you for reading and providing me a reminder that I need to write the next installment!

    • nayaz1625 profile image


      6 years ago

      Excellent hub. Will be of great help to beginners. The following could also supplement your article and help readers learn by playing fun accounting puzzles.

    • The Suburban Poet profile imageAUTHOR

      Mark Lecuona 

      7 years ago from Austin, Texas

      @Lilly - thank you. The "general population" is my target audience. I'm hoping these basics can help. Everyone should know a bit about the business world....

    • LillyGrillzit profile image

      Lori J Latimer 

      7 years ago from The River Valley, Arkansas

      Very well given explanation. These basics can be followed by the general population. Good marketing. :0)

    • The Suburban Poet profile imageAUTHOR

      Mark Lecuona 

      7 years ago from Austin, Texas

      Thanks Nan... I'm trying to keep it basic so it doesn't get over anyone's head too quickly...

    • profile image


      7 years ago

      Very sharp and good info for someone starting out on their own business. You have also expressed the article so that readers can understand what you are saying.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)