The accounting equation provides the analytical framework that we use throughout this book to understand the effects of transactions and events on the financial statements. This equation requires that a company’s assets exactly balance, or offset, an equal amount of financing provided by creditors and owners of the corporation. Each transaction must affect two or more accounts to keep the basic accounting equation in balance. In other words, for each transaction, one or more accounts must be debited, or entered on the left side of the account, and one or more accounts must be credited, or entered on the right side of the account, and the total monetary amount of the debits must equal the total dollar amount of the credits. The equality of debits and credits provides the basis for the double-entry system of recording transactions. Under double-entry system, debit and credit procedure is used to keep the accounting equation in balance by using appropriate accounts instead of using plus and minus procedure.