PRINCIPLES OF ACCOUNTS

THE DOUBLE ENTRY PRINCIPLE STATES THAT

  • A. every debit entry must have a corresponding credit entry ✓
  • B. every credit entry must have a corresponding double entry
  • C. every debit must must have a corresponding double entry
  • D. every assets must have a corresponding liability

 

The double entry principle is a fundamental concept in accounting that ensures the accuracy and completeness of financial transactions. It states that for every financial transaction, there must be at least two entries: a debit entry and a credit entry. These entries must be equal in value, and they must be recorded in different accounts to maintain the balance between assets, liabilities, equity, revenue, and expenses.

The debit entry increases the balance of the account it is recorded in, while the credit entry decreases the balance of the account it is recorded in. For example, when a company purchases inventory on account, the debit entry is recorded in the inventory account, increasing its balance, while the credit entry is recorded in the accounts payable account, increasing its balance as well. This ensures that the total amount of debits and credits is equal, maintaining the overall balance of the company’s financial records.

It is important to note that not every debit must have a corresponding double entry, as this would imply that there are always two accounts involved in a transaction. Similarly, not every credit must have a corresponding double entry, as some transactions may only involve one account. Additionally, while it is true that every asset must have a corresponding liability or equity account to maintain the balance between them, this is not part of the double entry principle.

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