alleryStart learning →Why must every transaction be recorded as two entries?
ATo lower the cost of the annual audit
BTo satisfy the tax authorities each year
CTo speed up the collection of receivables
DTo keep the accounting equation in balance
Answer & Solution
Correct answer: D. To keep the accounting equation in balance
1. The accounting equation must always balance, so the total on one side of the equals sign matches the total on the other.
2. Keeping it in balance requires every transaction to be recorded as two entries.
3. As each transaction is recorded there is an equal and opposite event, so two accounts or records change.
4. This method is called double-entry bookkeeping, and it exists for arithmetic balance rather than for tax filing or audit economy.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.3 Basic Accounting Procedures_
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