Final answer:
The essential principle of double-entry accounting is that the amount of debits must equal the amount of credits, which is what ensures the balance in the accounting equation and proper reflection of each transaction in the financial statements. Option A
Step-by-step explanation:
The correct answer to the student's question on recording an accounting transaction in a double-entry system is A) the amount of the debits must equal the amount of the credits. This fundamental principle ensures that each transaction is recorded in at least two accounts, and it keeps the accounting equation balanced, which is Assets = Liabilities + Owner's Equity (or Net Worth).
It's not necessary for the number of debit accounts to equal the number of credit accounts, nor must there only be two accounts affected by any transaction. It is crucial, however, to have entries on both sides of the accounting equation to reflect the dual impact of each transaction.
For example, if a bank grants a loan, it will debit an asset account for the loan amount and credit a liability account for the deposit account where the money is placed.
This double-entry ensures that both the increase in assets (the loan made) and the increase in liabilities (the deposit owed) are recorded, maintaining the balance and integrity of the bank's financial statements. A T-account can be used as a visual representation of this -- with assets on the left and liabilities plus net worth on the right, always balancing out. Option A