Which accounting system records each transaction at least twice, ensuring the sum of debits equals the sum of credits?

Double-entry accounting is the system that records each transaction at least twice, which is fundamental to its operation. This method follows the principle that every financial transaction affects at least two accounts. For instance, when a business makes a sale, it will increase the revenue account while also increasing its cash or accounts receivable account.

The importance of double-entry accounting lies in its ability to maintain balance in the accounting equation: Assets = Liabilities + Equity. By ensuring that the sum of debits equals the sum of credits, double-entry accounting provides a more comprehensive view of a company's financial position and helps prevent errors and fraud. This system provides built-in checks and balances, making it easier to track financial transactions accurately and reconcile accounts.

In contrast, single-entry accounting records only one side of each transaction and is simpler, making it less reliable for detailed financial analysis. Cash accounting focuses on recording revenue and expenses only when cash is actually in or out, not reflecting promises of future payments. Accrual accounting recognizes revenue and expenses when they are incurred, regardless of cash flow, but it does not inherently require the dual recording characteristic of double-entry accounting.