Double-Entry Accounting Basics Quiz

What is the fundamental principle behind double-entry accounting?

• Each transaction affects only one account.

• Each transaction is recorded twice, once as a debit and once as a credit.

• Each transaction must involve a cash account.

• Each transaction is recorded in a single journal.

In double-entry accounting, if a business takes out a loan, which of the following is true?

• The loan account is debited, and the cash account is credited.

• The cash account is debited, and the loan account is credited.

• Both the loan account and the cash account are debited.

• Both the loan account and the cash account are credited.

What does a debit entry in an asset account signify?

• A decrease in the asset

• An increase in the asset

• No change in the asset

• Transfer of the asset

Which of the following statements is true regarding double-entry accounting?

• The total debits must equal the total credits in each transaction.

• The total debits must always be greater than the total credits.

• The total credits must always be greater than the total debits.

• Only one account can be debited or credited in a transaction.

If a company purchases inventory on credit, how is this recorded in double-entry accounting?

• Debit inventory account, credit cash account

• Debit cash account, credit inventory account

• Debit inventory account, credit accounts payable account

• Debit accounts receivable account, credit inventory account

What effect does a credit entry in a liability account have?

• It decreases the liability.

• It increases the liability.

• It has no effect on the liability.

• It transfers the liability to another account.

In double-entry accounting, what is the effect of debiting a revenue account?

• Increase in revenue

• Decrease in revenue

• No change in revenue

• Transfer of revenue to another account

When a business pays off part of its loans, how is this transaction recorded?

• Debit the loan account, credit the cash account

• Debit the cash account, credit the loan account

• Credit both the loan and cash accounts

• Debit both the loan and cash accounts

What does a credit entry in an expense account indicate?

• An increase in expenses

• A decrease in expenses

• No change in expenses

• Transfer of expenses to another account

In double-entry accounting, if a business owner invests more capital into the business, how is this transaction recorded?

• Debit the owner's equity account, credit the cash account

• Debit the cash account, credit the owner's equity account

• Credit both the owner's equity and cash accounts

• Debit both the owner's equity and cash accounts