Which statement is correct regarding entering transactions into the fundamental accounting equation?

• A. A transaction can increase assets without affecting liabilities or equity.
• B. Every transaction affects at least two accounts, keeping the equation balanced.
• C. Only revenue transactions impact the accounting equation.
• D. The accounting equation is only updated at the end of the accounting period.

Answer: (B)

Verified step by step guidance

1. Understand the fundamental accounting equation: Assets = Liabilities + Equity. This equation must always remain balanced.
2. Recognize that every transaction in accounting affects at least two accounts to maintain the balance of the equation. For example, if assets increase, either liabilities or equity must also increase, or another asset must decrease.
3. Evaluate the first statement: 'A transaction can increase assets without affecting liabilities or equity.' This is incorrect because any increase in assets must be offset by a change in liabilities, equity, or another asset to keep the equation balanced.
4. Evaluate the second statement: 'Every transaction affects at least two accounts, keeping the equation balanced.' This is correct because the accounting equation must remain balanced after every transaction.
5. Review the remaining statements: 'Only revenue transactions impact the accounting equation' and 'The accounting equation is only updated at the end of the accounting period.' Both are incorrect because all types of transactions (not just revenue) impact the equation, and the equation is updated continuously as transactions occur.