Final answer:
The double entry system of accounting implies that each transaction affects the accounting equation twice, ensuring that debits and credits remain balanced.
Step-by-step explanation:
Double Entry System of Accounting
The double entry system of accounting means that each transaction has a dual effect on the accounting equation. This is because, in double entry accounting, every transaction is recorded in at least two accounts—one as a debit and the other as a credit. These entries must balance, meaning the total debits must equal total credits, which maintains the equation Assets = Liabilities + Equity. The double entry system allows for the preparation of accurate financial statements and helps in maintaining the integrity of financial records.
T-accounts are a visual aid in accounting to see the effect of transactions on individual accounts. When a transaction occurs, like a time deposit, it is recorded on the T-account balance sheet. This also follows the double entry system, where the bank's liabilities increase due to the deposit, and their cash or loanable funds (assets) also increase.