Explanation of the Dual Method of Accounting

by Gail Sessoms

Businesses use accounting methods to record and monitor financial transactions, such as income, expenses, liabilities and assets. The dual or double-entry method, requires recording each transaction twice, reflecting both a credit and a debit. The single-entry method involves recording transactions for cash receipts and cash disbursements in one of two journals. While the single-entry method works well for small businesses, double entry often is preferred for larger or more complex businesses and for start-up businesses geared toward rapid growth.


Dual-entry accounting is considered a self-balancing method because it allows users to detect errors and perform crosschecks of transactions. The dual accounting method, unlike single entry, displays the company’s actual worth and start-up investment amounts. Dual entry also allows companies to correct for depreciation of assets, such as equipment and inventory. The dual-entry method, which reflects a more comprehensive picture of a company’s financial health than the single-entry method, provides more effective financial controls for companies that have more complex financial transactions, such as mortgages, loans, and large accounts receivable and payable.


The dual-entry accounting method requires a corresponding entry for each financial transaction recorded. For instance, a business loan is entered as an increase in assets and also is entered as a liability. The two sides of every financial transaction, credit and debit, are recorded on balance sheets. A balance sheet provides a snapshot of a company’s financial health and stability by continuously balancing assets and liabilities against owner or shareholder equity. Journals and ledgers, created to meet the individual needs of a company, serve as balance sheets for the dual transactions


The dual-entry accounting method does not present many disadvantages. Using the method requires advanced knowledge of accounting terms and financial transactions, such as the business loan that is recorded as both asset and liability. The dual method requires more time and effort than the single-entry method, especially if multiple written journals and ledgers are used. However, accounting and bookkeeping software eliminates the extra work of the dual-entry method. Bookkeeping and accounting software programs allow users to make single entries, which are automatically converted to double entries.

Bookkeeping and Accounting

The dual- and single-entry accounting methods are sometimes identified as bookkeeping methods (Ref 2, 5). Accounting professionals and the Internal Revenue Service recognize two accounting methods for businesses: cash basis and accrual basis (Ref 2, 3, 4). The cash basis method requires recording transactions when cash is received and when expenses are paid. Businesses that use the accrual basis method record transactions when income is earned and when debt is incurred (Ref 2). The dual-entry method of recording financial transactions can be used with both the cash basis and the accrual basis (Ref 4).

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