Bookkeeping Basics · Edmonton
Double entry bookkeeping, explained with real numbers.
The one idea every set of books is built on. Learn the accounting equation, follow five transactions through a small Edmonton business, and see why the books always balance.
By the Plum team- Updated Oct 2026
- 9 min read
- Every transaction touches at least two accounts. One side is a debit, the other is a credit, and they always match.
- It all rests on one equation: assets = liabilities + equity.
- Revenue and expenses are just equity in motion. Profit raises equity, losses lower it.
- QuickBooks Online does double entry for you, but knowing how it works is how you catch mistakes.
If you want to understand bookkeeping properly, start here. Double entry bookkeeping, explained simply, is this: every transaction is recorded in at least two places, and the two sides always balance. Money doesn't appear from nowhere or vanish. It always comes from somewhere and goes somewhere.
This guide is the first stop on our Bookkeeping Basics learning path. We'll cover the accounting equation, walk five real transactions through a small Edmonton business, and show you what QuickBooks Online is doing behind the scenes every time you categorize a bank transaction.
1The accounting equation
Every set of books, from a one-person freelancer to a large corporation, is built on one line:
- Assets are what the business owns or is owed: the bank account, equipment, money customers owe you, GST you can claim back.
- Liabilities are what the business owes others: credit cards, loans, GST collected that belongs to CRA, bills you haven't paid.
- Equity is what's left for the owner: money you put in, plus profits the business has kept, minus what you've taken out.
Revenue and expenses don't appear in the equation directly, because they're part of equity. When you earn revenue, equity goes up. When you pay an expense, equity goes down. At year-end the net of the two (your profit or loss) rolls into equity for good.
So the expanded version is: Assets = Liabilities + Owner's equity + Revenue − Expenses. If you hold onto that, the rest of bookkeeping is detail.
The four ways a transaction can move the equation
Every transaction you will ever record does one of four things, and each keeps the equation balanced:
- Both sides go up. You borrow $10,000 from the bank: cash (asset) and the loan (liability) both rise.
- Both sides go down. You pay $500 off the credit card: cash and the card balance both fall.
- One asset swaps for another. You buy a laptop with cash: one asset falls, another rises, and the total doesn't move.
- One claim swaps for another. A $300 supplier bill arrives that you'll pay next month: accounts payable (a liability) rises and the expense lowers equity by the same amount. Assets don't move at all.
When you're unsure how to record something, ask which of these four it is. The answer usually tells you both accounts.
2Double entry bookkeeping explained with a worked example
Say you start a mobile bike repair business in Edmonton. You're registered for GST, so you charge 5% on your work and claim back the GST you pay on business costs. Here are your first five transactions.
1. You put in $5,000 of your savings
The business bank account (an asset) goes up $5,000. Where did it come from? You, the owner. So owner's equity goes up $5,000. Both sides of the equation rise by the same amount.
2. You buy a repair stand and tools for $1,200 plus $60 GST
You pay $1,260 by debit. Cash goes down $1,260. In exchange you get equipment worth $1,200 (an asset) and $60 of GST you can claim back as an input tax credit (also an asset for now). Assets swap form; the total doesn't change.
3. You fix bikes for a cycling club and invoice $800 plus $40 GST
They'll pay later. Accounts receivable (an asset) goes up $840. Revenue goes up $800, which raises equity. And the $40 of GST you charged isn't yours: it's a liability to CRA.
4. The club pays the invoice
Cash goes up $840 and accounts receivable goes down $840. One asset becomes another. Notice there's no new revenue here: you already earned it when you did the work and sent the invoice.
5. You buy $150 of parts plus $7.50 GST on the business credit card
Parts used on jobs are an expense, which lowers equity by $150. You can claim the $7.50 GST. And you now owe the credit card company $157.50, a liability.
The journal entries
Here are the same five transactions written as journal entries. Debits are on the left, credits on the right. (If those words are new, our debits and credits cheat sheet covers them in detail.)
| # | Account | Debit | Credit |
|---|---|---|---|
| 1 | Bank | $5,000.00 | |
| 1 | Owner's equity | $5,000.00 | |
| 2 | Equipment | $1,200.00 | |
| 2 | GST recoverable (ITCs) | $60.00 | |
| 2 | Bank | $1,260.00 | |
| 3 | Accounts receivable | $840.00 | |
| 3 | Repair revenue | $800.00 | |
| 3 | GST payable | $40.00 | |
| 4 | Bank | $840.00 | |
| 4 | Accounts receivable | $840.00 | |
| 5 | Parts and supplies expense | $150.00 | |
| 5 | GST recoverable (ITCs) | $7.50 | |
| 5 | Credit card payable | $157.50 | |
| Totals | $8,097.50 | $8,097.50 |
Every entry balances on its own, so the whole set balances too. That's the built-in check that makes double entry so useful.
Checking the equation
Now add everything up after the five transactions:
| Side | Accounts | Total |
|---|---|---|
| Assets | Bank $4,580 + equipment $1,200 + GST recoverable $67.50 | $5,847.50 |
| Liabilities | GST payable $40 + credit card $157.50 | $197.50 |
| Equity | Owner's equity $5,000 + revenue $800 − expenses $150 | $5,650.00 |
Liabilities plus equity is $197.50 + $5,650 = $5,847.50, exactly equal to assets. It will be true after every transaction you ever record. Your profit so far is $650, and your net GST position is $67.50 recoverable minus $40 owing, so you'd get $27.50 back if this were your whole GST period.
3Single entry vs double entry
Single entry bookkeeping is a list: date, description, money in, money out. A cheque register or a simple spreadsheet works this way. It tells you your cash, but not much else. You can't see what you owe, what customers owe you, or what your equipment is worth, and there's no built-in check for errors.
CRA doesn't legally require a particular system, but it does expect records that are complete and that support every number on your return. For a sole proprietor that's the T2125, and for a corporation it's the T2 with financial statements attached. Double entry is what makes those statements possible. A balance sheet only exists because of it.
In practice, the moment you use QuickBooks Online, Xero or any real accounting software, you're using double entry whether you notice it or not.
4What QuickBooks Online does behind the scenes
When you open the Banking page in QuickBooks Online and categorize a $42 software charge as "Software," you're only choosing one account. QuickBooks already knows the other side: the bank account the transaction came from. If you pick a GST tax code, it also splits off the GST portion to GST/HST Payable. So one click creates a balanced three-line entry.
The same is true everywhere else in the software:
- An invoice debits Accounts Receivable and credits your income account and GST/HST Payable.
- Receiving a payment debits the bank (or Undeposited Funds) and credits Accounts Receivable.
- A bill debits an expense and credits Accounts Payable.
- A journal entry (from the + New menu) lets you write both sides yourself. QuickBooks won't save it unless debits equal credits.
To see the entry behind any transaction, open it and look for the transaction journal option in the More menu at the bottom, or run a Journal report for that date. It's a great way to learn: pick ten transactions and read the debits and credits behind each one.
5Common double entry mistakes
Software stops you from making unbalanced entries, so the mistakes that matter are balanced ones posted to the wrong place:
- Recording a customer payment as new revenue. If you already invoiced, the payment should clear Accounts Receivable. Coding the deposit to income counts the sale twice.
- Expensing equipment. A $1,200 repair stand is an asset you claim over time through capital cost allowance (CCA), not a supplies expense. Small tools can be different, so ask your accountant where the line is.
- Treating owner money as revenue. Money you put into the business is equity (or a shareholder loan in a corporation), never income.
- Treating owner withdrawals as expenses. Taking $2,000 for yourself isn't a business expense. It's a draw or, in a corporation, a shareholder loan, salary or dividend.
- Leaving GST inside the expense. If you're registered and don't split out the GST, your expenses are overstated and you miss input tax credits.
6Where to go next
Once the equation makes sense, the next step is learning which side of each account goes up and down. Work through these in order:
The chart of accounts guide is a good next read, because it shows how to name and organize all the accounts these entries land in.
Understanding double entry won't make you want to do every entry yourself, but it does mean you'll know what good books look like. If you'd rather have a bookkeeper handle the entries while you keep an eye on the numbers, Plum works with owners across Edmonton, St. Albert, Sherwood Park and Spruce Grove. Book a short call and we'll walk through your books with you.
7Questions people ask
What is double entry bookkeeping in simple terms?
Every transaction is recorded in at least two accounts, so something always goes in and something always comes out. The total of the debits always equals the total of the credits, which keeps the accounting equation in balance.
Is single entry bookkeeping allowed in Canada?
CRA doesn't name a required system, but it does expect complete, reliable records that support your income and expenses. In practice almost every business uses double entry, because any accounting software, including QuickBooks Online and Xero, records everything that way automatically.
What is the accounting equation?
Assets equal liabilities plus equity. Everything the business owns was paid for either by someone it owes (liabilities) or by the owner and the profits it has kept (equity).
Do I need to understand double entry if I use QuickBooks?
You don't need to write entries by hand, but understanding it helps you spot mistakes. When a bank transaction is coded to the wrong account, double entry is how you see what actually went wrong and how to fix it.
Does double entry mean I record every transaction twice?
No. You record each transaction once, but that one record has two or more sides. For example, a $500 sale is one entry that increases both your bank account and your revenue.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.