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Chapter 3: Question 5Q (page 127)

Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.

Short Answer

Expert verified

No, Andrea Pafko is not right. This is because double entry does not mean that the transaction has to be entered twice. According to the rule of double-entry system, every transaction has a double effect, i.e., debit entry must be followed by credit entry and vice versa.

Step by step solution

01

Meaning of Transaction

A transaction is regarded as the economic activity that impacts the businesses financial position and financial statements.

02

Reason for not recording double-entry twice

By the term double-entry system, it means that every transaction has two aspects, a debit, and a credit. Every transaction will have an effect on the balance sheet in two ways, that is, it will either increase or decrease both the assets and liabilities at the same time and with an equal amount. Here, debit and credit must be equal and this doesn’t mean that the transaction should be recorded twice.

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