Double Entry Bookkeeping Quiz

What is the fundamental principle of double entry bookkeeping?

• Financial transactions have random effects on different accounts

• Every financial transaction only affects one account

• Double entry bookkeeping only applies to large corporations

• Every financial transaction has equal and opposite effects in at least two different accounts.

What is the accounting equation and how is it represented?

• Liabilities = Assets + Equity

• Assets = Liabilities + Equity

• Assets - Liabilities = Equity

• Assets = Liabilities - Equity

What is the difference between debit and credit entries in double entry bookkeeping?

• Debit entries increase assets or decrease liabilities and equity, while credit entries decrease assets or increase liabilities and equity.

• Debit entries decrease assets or increase liabilities and equity

• Debit and credit entries have the same effect on assets, liabilities, and equity

• Credit entries increase assets or decrease liabilities and equity

Name three types of accounts used in double entry bookkeeping.

• Debit, Credit, Balance

• Income, Expenses, Revenue

• Cash, Check, Savings

• Assets, Liabilities, Equity

Explain the concept of journal entries in double entry bookkeeping.

• Journal entries are only used for recording income

• Journal entries are only used for recording expenses

• Journal entries are the initial recording of transactions in the accounting system using double entry bookkeeping.

• Journal entries are not necessary in double entry bookkeeping

In which type of account do we record the owner's investments in a business?

• Revenue account

• Owner's equity/capital account

• Expense account

• Liability account

What is the effect of a credit entry in the liability account?

• Increases the liability

• Decreases the liability

• Has no effect on the liability

• Increases the asset

How do you calculate the total debits and credits in a trial balance?

• Multiply the debit balances by the credit balances

• Add up all the debit balances and all the credit balances separately. Totals are the largest figure.

• Subtract the credit balances from the debit balances

• Divide the total balance by the number of accounts

Explain the concept of 'double entry' in double entry bookkeeping.

• Every transaction is recorded in at least two different accounts

• Double entry bookkeeping only involves recording expenses and not income

• Double entry means recording transactions twice in the same account

• Every transaction is recorded in only one account

What is the role of a ledger in double entry bookkeeping?

• A ledger is used to record only income transactions

• A ledger is used to record only expense transactions

• A ledger is a book or other collection of accounts in which account transactions are recorded.

• A ledger is not necessary in double entry bookkeeping