In what type of accounting system must debits always equal credits? What is the accounting identity?

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The accounting system in which debits must always equal credits is the double-entry accounting system. The double-entry accounting identity states that for every transaction, the sum of all debits must equal the sum of all credits. This means that for every entry made into a company’s financial books, there must be an equal and opposite entry to offset it. For example, if a company purchased $1,000 worth of supplies on credit, they would record these supplies with a debit to the asset account and a credit to the accounts payable account. In this case, both entries (debit and credit) are 1,000 which balances out at zero – thus fulfilling the double-entry accounting identity rule.