How does double-entry bookkeeping work?
Accountants use your law firm’s trial balance, to generate the balance sheet and profit & loss (income) statement. The trial balance contains all general ledger accounts and shows the balances in those accounts. Debits appear on the left side of the trial balance and Credits appear on the left side of the trial balance.[1] Assets and expenses increase with a debit while liabilities, owner’s equity, and revenues increase with a credit.[1] The total amount of debits shown on the trial balance should always equal the total number of credits:
Because the credits and debits on the trial balance must always be equal, every financial transaction you record in your books must affect two different general ledger accounts.[1][2] One account will have a debit in the amount of the transaction and the other will have a credit in the same amount.[3] By affecting two accounts, one with a debit and the other with a credit in the same amount, the total amount of debits and credits on the trial balance remains equal.
So when using a double-entry system, if you purchase $50 worth of office supplies you record the transaction as follows:
| Account | Debit | Credit |
| Office Supplies Expense | 50 | |
| Cash (Bank Account) | 50 |
Most general and legal-specific bookkeeping programs automatically enter the cash account debit/credit when you record a financial transaction, so you only have to enter the other account that is affected.
References
1. Double-Entry, Debits and Credits
2. Double entry accounting
3. What is Double-Entry Bookkeeping?