Accounting Fundamentals Certification (AFC) 2025 – 400 Free Practice Questions to Pass the Exam

For transactions to be properly recorded in accounting, the fundamental principle of double-entry bookkeeping must be followed. This principle states that for every transaction, there must be an equivalent entry in both the debit and credit accounts, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.

When transactions are recorded accurately, the total amount of debits must equal the total amount of credits. This equality ensures that the accounting records maintain their integrity and reflect the true financial position of the business. If the totals do not match, it indicates an error in recording that needs to be identified and corrected.

In this context, the other choices do not align with this foundational accounting principle. For instance, if the total debits exceed or fall short of the total credits, it signifies that there has been a mistake in recording transactions. Furthermore, suggesting that only cash transactions need to be recorded overlooks the broader scope of accounting principles, which apply to all types of transactions, not just cash-based ones. This adherence to the equal recording of debits and credits is essential for producing accurate financial statements and for overall effective financial management.