What is double-entry bookkeeping?

Double-entry bookkeeping records every transaction twice, as a debit in one account and an equal credit in another, so the books always balance and every pound can be traced to where it came from and where it went.

A plain-English definition for UK small businesses, not tax advice. Where a figure changes at a Budget, check gov.uk or ask your accountant.

LAST REVIEWED 29 AUGUST 2026 · BIZZLE

Why record everything twice?

Because every transaction has two sides. A sale increases what you are owed and increases your income. Paying a bill reduces your bank balance and reduces what you owe. Recording both sides captures the whole event, and recording them as equal amounts means the total of all debits always equals the total of all credits.

That equality is the check. If the books do not balance, something has been entered once, or wrongly. A single-entry system, which is really just a list of money in and money out, has no such check and no way of showing what you own and owe, only what has moved.

Debit and credit are not good and bad. They are the left and right sides of each account. Assets and costs increase with debits; income, liabilities and the owner's stake increase with credits. It takes a little getting used to and then it is simply how the books work. Every proper accounting system is double-entry underneath, whether or not it shows you.

What does it look like in practice?

EventDebitCredit
Invoice a customer £500 plus £100 VATDebtors £600Sales £500, VAT £100
Customer paysBank £600Debtors £600
Buy materials £200 plus £40 VAT on accountMaterials £200, VAT £40Creditors £240
Pay the supplierCreditors £240Bank £240
Monthly van depreciationDepreciation £100Accumulated depreciation £100

How is it different from a spreadsheet?

A spreadsheet of bank transactions is single-entry. It tells you what the bank did. It cannot tell you that a customer owes you £600, because no bank transaction has happened yet, or that the VAT sitting in your account belongs to HMRC. Double-entry captures those as soon as they arise, which is why the balance sheet and the VAT return can be produced from it and not from the spreadsheet.

Bizzle keeps a real double-entry ledger underneath the automation, with every automated entry logged and reversible, so what an accountant sees at year end is a set of books rather than a bank export.

TERMS USED ON THIS PAGE

assetsliabilitiesVATbalance sheetVAT returnyear endAll terms →

COMMON QUESTIONS

Questions people ask.

Do I need to understand debits and credits to run a small business?

Not to run it day to day, if your software handles the entries. It helps to understand them when something looks wrong, when reading a balance sheet, or when talking to your accountant, and the basics take an afternoon to grasp.

Is double-entry required by law?

Not by name. What is required is records sufficient to show the business's position and to support the accounts and tax returns. For a limited company that effectively means double-entry, and for a sole trader it is the only reliable way to produce a balance sheet.

What is the difference between a debit and a credit?

They are the two sides of every entry. Debits increase assets and costs and decrease liabilities and income; credits do the reverse. The words carry no judgement, and the confusing part is only that your bank statement uses them from the bank's point of view.

Can I switch to double-entry part-way through a year?

Yes. You enter opening balances for what you owned and owed at the switch date, so the ledger starts balanced, and record transactions from there. Doing it at a year end or VAT quarter end keeps the join cleaner, but any date works.

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