In accounting, the fact that a transaction affects two separate accounts is called what?

• A. Compound-Entry Accounting
• B. Double-Entry Accounting
• C. Accrual Accounting
• D. T-Accounting

Answer: (B)

Double-entry accounting. Every transaction affects at least two accounts, with one or more debits and the same total credits, so the books stay balanced. This approach keeps the accounting equation (assets = liabilities + equity) in harmony and provides a complete picture of how a transaction changes resources and claims.

For example, paying cash for an expense debits the expense and credits cash, increasing expenses while reducing cash. Recording a sale on credit debits accounts receivable and credits revenue, expanding assets and increasing equity through income. Purchasing equipment on credit debits equipment and credits accounts payable, showing both the asset increase and the obligation to pay later.

This method contrasts with accrual accounting, which focuses on recognizing revenue and expenses when earned or incurred, not on the mechanism of the recording itself. The other terms aren’t the standard label for this fundamental recording method.