Question

The rule 'every transaction affects two or more ledger accounts' is based or the concept of ___________.

• A. Going concern
• B. Double entry system of book-keeping
• C. Money measurement
• D. Periodicity

Answer 1

Answer: (B)

Double entry system of book-keeping

Double entry system is based 'on scientific principles therefore, it is used by most of the business houses. This system recognizes the fact that every transaction has two aspects and records both aspects of each and every transaction. For every debit there will be a credit and vice a versa.

For example, goods worth Rs.10000 purchased on cash. It affects two account i.e. goods and cash. Following the rule of real account, the below entry will be passed:

Purchase/Goods A/c Dr.

To Cash A/c