Question

A double-entry accounting system is an accounting system: A) That records each transaction twice. B) That records the effects of transactions and other events in at least two accounts with equal debits and credits. C) In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits. D) That may only be used if T-accounts are used. E) That insures that errors never occur.

Answer 1

Answer:

B) That records the effects of transactions and other events in at least two accounts with equal debits and credits.

Explanation:

A system of accounting where the effect of a transaction is recorded in two or more accounts with the value of credit entry equal to that of credit entry.

The principle states that for every credit entry there must be a corresponding debit entry, therefore keeping the accounts in balance.

The system started with use of T-account;  done manually using books, but modern-day accountants do same with the help of computers.

Lets look at the following examples :

1) Sales of $10,000 was made.

Debit        cash account                $10,000

 Credit          Sales account                                 $10,000

2) Sales of $15,000 was made with cash of $12,000 received.

Debit      Cash account                               $12,000

Debit      Receivables account (debtors)    $3,000

  Credit   Sales account                                                 $15,000

Note that the amount of debit is equal in value to credit

WE can answer the question as follows:

Statement A is wrong, a transaction is treated once.

Statement C is wrong, recording must involve at least a debit and a credit

Statement D is also wrong because computers now handle same

Statement E is wrong; errors can occur.

The correct answer is B