What does "double-entry accounting" ensure?

Double-entry accounting ensures that the accounting equation, which states that assets equal liabilities plus equity, always remains balanced. This system requires that for every financial transaction, there are at least two accounts involved: one account is debited, and another is credited for the same amount. This interplay between debits and credits maintains balance within the financial statements, ensuring the integrity of the accounting records.

For instance, if a business takes a loan, it increases its cash (an asset) while also recognizing a liability (the loan amount). Both sides of the equation are impacted, showing that the total value of what the company owns (assets) is equal to what it owes (liabilities) plus the shareholders' equity.

This balancing act allows businesses to have a clear picture of their financial status, making it easier to track income, expenses, and overall financial health. It sets double-entry accounting apart from other systems that may not require balance, which can lead to errors and misrepresentation of financial conditions.

The other options do not reflect the principles of double-entry accounting adequately. For example, only recording revenue does not provide a complete view of a company’s financial activities, and impacting a single account does not represent the nature of transactions that typically affect multiple accounts