In terms of an accounting equation, a singular transaction may affect accounts on which sides?

In terms of an accounting equation, a singular transaction may affect accounts on which sides?

• A. Strictly on one side of the equation only
• B. Always on both sides of the equation
• C. Either one side or both sides
• D. None of the above

Answer: (C)

In double-entry accounting, every transaction is recorded with equal debits and credits, and the accounting equation must stay in balance. The accounts involved can lie on either side of the equation (left side: assets and expenses; right side: liabilities, equity, and revenue). A single transaction can affect accounts on just one side or on both sides. For example, moving value between assets keeps everything on the same side: paying cash to buy equipment increases one asset and decreases another asset, so only the left side changes and the right side is unaffected. On the other hand, a transaction can involve both sides: buying supplies on credit increases an asset and increases a liability, or performing a service for cash increases an asset (cash) and increases revenue (which increases equity on the right). This shows a transaction may touch one side or both sides of the equation.

In double-entry accounting, every transaction is recorded with equal debits and credits, and the accounting equation must stay in balance. The accounts involved can lie on either side of the equation (left side: assets and expenses; right side: liabilities, equity, and revenue). A single transaction can affect accounts on just one side or on both sides.

For example, moving value between assets keeps everything on the same side: paying cash to buy equipment increases one asset and decreases another asset, so only the left side changes and the right side is unaffected. On the other hand, a transaction can involve both sides: buying supplies on credit increases an asset and increases a liability, or performing a service for cash increases an asset (cash) and increases revenue (which increases equity on the right). This shows a transaction may touch one side or both sides of the equation.