What does double-entry accounting require for each transaction?

Double-entry accounting requires that each transaction be recorded in at least two accounts. This foundational principle ensures that the accounting equation—Assets = Liabilities + Equity—remains balanced after every transaction. For instance, if a business purchases inventory with cash, it would record a debit to the inventory account (an asset) and a credit to the cash account (another asset), reflecting the increase in one account and the corresponding decrease in another.

This method allows organizations to track their financial positions more accurately and provide a complete picture of their financial activities. By using at least two accounts for each transaction, double-entry accounting helps to minimize errors and discrepancies that could arise if transactions were recorded in only one account. Moreover, it enhances the overall reliability of financial statements and supports the development of robust financial reporting.

The other options do not reflect the fundamental requirements of double-entry accounting. Recording all expenses in a single account does not encompass the necessary dual entries, nor does maintaining separate accounts for cash and credit transactions capture the essential nature of double-entry bookkeeping. Lastly, documenting transactions only at the end of the month is contrary to the immediacy and precision that double-entry accounting seeks to uphold.