BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
when one records a transaction in the accounting system, at least two effects on the basic accounting equation will result
|
|
|
when an exchange takes place between two parties, both parties must record the transaction
|
|
|
when a transaction is recorded, both the balance sheet and the income statement must be impacted
|
|
|
when a transaction is recorded, one account will always increase and one account will always decrease
|
Detailed explanation-1: -Answer and Explanation: The correct option is a. When one records a transaction in the accounting system, at least two effects on the basic accounting equation will result. When the accountant notes down any transaction or event in the records, then there is a minimum of two accounts that get affected due to that.
Detailed explanation-2: -According to the Dual Aspect Concept, each business transaction has a dual or a two way effect. This implies that a particular business transaction involves minimum two accounts when recorded in the books of accounts. This principle is the foundation of Double Entry System of accounting.
Detailed explanation-3: -In a double-entry accounting system, every transaction affects at least two accounts. For example, if a company buys a $1, 000 piece of equipment on credit, that $1, 000 is an increase in liabilities (the company must pay it back) but also an increase in assets.
Detailed explanation-4: -The double-entry system of bookkeeping standardizes the accounting process and improves the accuracy of prepared financial statements, allowing for improved detection of errors.
Detailed explanation-5: -What is the Dual Aspect Concept? The dual aspect concept states that since every transaction has a dual effect, the accounting records must reflect the same to show the accurate movement of funds. For instance, a buyer pays cash in return for a purchased item while the seller gains cash for the sold item.