What method of bookkeeping tracks which accounts increase and which decrease for a given transaction?

The method of bookkeeping that tracks which accounts increase and which decrease for a given transaction is double-entry accounting. This system is based on the principle that every financial transaction affects at least two accounts in opposite ways. For instance, when a company makes a sale, it will increase its revenue account while simultaneously increasing its cash or accounts receivable account, thus ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.

Double-entry accounting also allows for a comprehensive view of financial health since it provides a detailed record of all transactions, making it easier to identify the sources and uses of funds. Moreover, this method enhances the accuracy of financial reporting, as any errors can be detected through the balance of debits and credits.

In contrast, single-entry accounting only records one side of a transaction, making it less reliable for tracking the overall financial situation and increasing the risk of errors. Accrual accounting focuses on recognizing revenue and expenses when they are incurred rather than when cash is exchanged, while cash accounting only records transactions when money changes hands. While these methods have their own advantages, they do not provide the same level of detail in terms of tracking account movements as double-entry accounting does.