Explain the reason that a minimum of two accounts are impacted by every transaction

Expert Solution

Accounting is based on the double entry book keeping system, i.e every transaction has two aspects one is Debited and another is credited. Every transaction would result in either assets or liability increasing and decreasing the another liability or asset. For example if furniture is purchased on cash for $ 2,000 it means that firm cash balance has decreased by $ 2,000 and firm's asset ie furniture has been increased by $ 2,000. Thus this transaction has affected two accounts, cash account has decreased and furniture account is increased. So journal entry would be

Furniture Account Dr 2000

To Cash Account 2,000

Even if teh furniture is purchased on credit, it would increase furniture on one side and liabilities on the other hand. Again two accounts were affected and the entry passed would be

Furniture Account Dr 2000

To Liability Account 2,000

thus every transaction has affected two accounts.

jeff jeffy answered 1 year ago

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