Double entry bookkeeping is an accounting methodology introduced in the 13th century to to make sure that each accounts and indeed each transaction is properly balanced.
When these are all required to balance, the likelihood of data-entry errors is greatly reduced. For large, complex sets of accounts with many transactions, it is distressingly easy to make errors that may go undetected for a long time, and be appallingly difficult to track down, even when double-entry bookkeeping is used.
A double-entry transaction is a transaction that contains entries for two (or more) accounts that balance against one another. One account is debited by an amount exactly equal to what the other is credited. By ensuring that each transaction balances, a balanced set of accounts is guaranteed. This doesn't prevent you from having errors, but certainly eliminates the large class of I forgot to enter that part of the transaction errors.
Double-entry may be introduced in a more intuitive way via the notion of a transfer from one bank account to another, where an amount is taken out of one bank account and deposited in the other. This is effectively the "rule" of double entry accounting; if you add something in to one account, you have to have another component to that transaction to balance this.
Not-quite-an-aside: If you look at your bank statements, they are typically written up from the bank's perspective, which is exactly opposite to yours. For instance, when you put money in, establishing a deposit, this establishes a DEBT on their part.
The perhaps less obvious extension is the notion that double entry can be used to represent income and expenses as well as bank transfers. See the Income/Expense page for a more detailed discussion of that.
The fact that the identity requires merely that the total balances means that it is a little bit misleading to call this double-entry bookkeeping; it would be somewhat more accurate to call it multiple-entry bookkeeping. Unfortunately, there's 700 years of history of use of the term, which sufficiently discourages changing it. (And some people think that UNIX has some crufty old bits of oddness. Hah!)
GnuCash treats "Debits" as positive values, and "Credits" as negative values, so that this identity simplifies to value1 + value2 + value3 + ... = 0
To create a double-entry transaction:
A menu will drop down, listing all of the accounts from which a transfer may be made.
When you record the transaction, the double-entry will automatically be made, and the transaction automatically appear in all windows showing the transferred-from and the transferred-to accounts.
To change a double-entry transaction:
Simply edit the transaction in any window in which it appears.
Any changes made will be automatically reflected in both accounts and all windows displaying the transaction.
Similarly, when a double-entry transaction is deleted, the "splits" will be deleted from both accounts, and balances will automatically be recalculated for both accounts.
To change the transfer account, simply select a new account from the pull-down menu. When you record the transaction, it will automatically be selected from the old account, and inserted into the new account.
GnuCash can be configured to be strict about double entry, or you may configure it to be "loose."
In "loose" mode, you can create unbalanced transactions, that is, transactions where the "splits" don't balance to zero. That discards the validation that comes from using the more strict double entry scheme, which is probably not a really wise move. In effect:
But if you decide to "outsmart the system," and have a number of unbalanced transactions, you'll probably want to clean this up at some point. To clean up these unbalanced transactions, you Scrub the account clean by choosing Scrub from the window menu. This will examine each transaction; if the transaction doesn't balance, a split entry will be created and placed into an account named Unbalanced. You may then review these splits and move them to their proper accounts.
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