A transaction can be ______.

• A. ignored if it affects cash
• B. recorded only as a debit
• C. recorded as both a debit and a credit
• D. recorded only as a credit

Answer: (C)

Verified step by step guidance

1. Understand the concept of double-entry accounting: In financial accounting, every transaction must be recorded as both a debit and a credit to maintain the accounting equation (Assets = Liabilities + Equity). This ensures that the books remain balanced.
2. Analyze the options provided: Transactions cannot be ignored if they affect cash, as cash is a critical asset account. Recording only a debit or only a credit would violate the double-entry principle.
3. Recognize the correct principle: Every transaction impacts at least two accounts, one as a debit and the other as a credit. For example, if cash is received, it is debited (increase in asset), and the corresponding account (e.g., revenue or accounts receivable) is credited.
4. Apply the rule to real-world examples: For instance, if a company pays rent, the Rent Expense account is debited (increase in expense), and the Cash account is credited (decrease in asset). This demonstrates the dual effect of transactions.
5. Conclude that the correct answer is: 'Recorded as both a debit and a credit,' as this aligns with the fundamental principles of double-entry accounting.