Question

Under what system will every transaction be recorded in at least two accounts?

Option 1: Single-entry accounting system
Option 2: Double-entry accounting system
Option 3: Accrual accounting system
Option 4: Cash accounting system

Answer 1

The double-entry accounting system is where each transaction impacts at least two accounts, ensuring the accounting equation remains balanced. The correct option is 2.

Step-by-step explanation:

Every transaction will be recorded in at least two accounts under the double-entry accounting system. This method of accounting is based on the principle that each transaction has two-fold effects and thus affects at least two separate accounts.

It ensures that the accounting equation (Assets = Liabilities + Equity) remains in balance after each transaction. For instance, if a business receives cash from a customer for a sale, it will record an increase in Cash (asset account) and an increase in Sales Revenue (equity account).