In double-entry accounting, every transaction must ...

In double-entry accounting, every transaction must ...

• A. increase at least one asset/expense/revenue and a corresponding change in liabilities or equity
• B. increase both assets and revenues
• C. decrease both assets and liabilities
• D. not affect the equation

Answer: (B)

In double-entry accounting, every transaction has a dual impact that keeps the accounting equation in balance. A common and clear example is earning revenue and receiving something of value in return, which often shows up as an increase to an asset (like cash or accounts receivable) and an increase to revenue (which increases equity). This illustrates how one event can raise both an asset account and a revenue account at the same time, preserving the balance between assets and the claims on assets (liabilities and equity). The other patterns—such as transactions that increase assets but not revenues, or that involve decreasing assets and liabilities without affecting revenue—also exist and still balance when you record the corresponding debit and credit, but the described dual effect of increasing assets alongside revenues captures the typical dual-entry impact most directly. The key takeaway is that debits and credits must balance, and revenue increases are part of the equity side, often accompanied by an asset increase.

In double-entry accounting, every transaction has a dual impact that keeps the accounting equation in balance. A common and clear example is earning revenue and receiving something of value in return, which often shows up as an increase to an asset (like cash or accounts receivable) and an increase to revenue (which increases equity). This illustrates how one event can raise both an asset account and a revenue account at the same time, preserving the balance between assets and the claims on assets (liabilities and equity). The other patterns—such as transactions that increase assets but not revenues, or that involve decreasing assets and liabilities without affecting revenue—also exist and still balance when you record the corresponding debit and credit, but the described dual effect of increasing assets alongside revenues captures the typical dual-entry impact most directly. The key takeaway is that debits and credits must balance, and revenue increases are part of the equity side, often accompanied by an asset increase.