Question

In her work as an accountant, Sandra Garcia recognizes that for every transaction that affects an asset, an equal transaction must also affect either a liability or owners' equity. Sandra is using ________ bookkeeping
A) double profit
B) double entry
C) bottom line
D) triple entry
E) dividend

Answer 1

Answer:

Correct option is (B)

Explanation:

In accounting, double entry book keeping is followed as every financial transaction has dual effect on the books of accounts. It starts with the accounting equation which stated:

Assets = Liabilities + Stockholder's Equity

If there is an increase in assets, there has to be a subsequent increase in either liability or stockholder's equity.

Every transaction is debited in one account and credited in some other account.

For example Depreciation for the year is $2,000. Depreciation expense account is debited by $2,000 and accumulated depreciation account is credited by $2,000.

Since Sandra recognizes that an effect on asset will have a simultaneous effect on either liability or equity, she is following double entry bookkeeping.