Understanding Double Entry Accounting

What is one of the main differences between single entry and double entry accounting?

• Single entry uses market values, double entry uses cost basis values.

• Single entry updates the net worth statement continuously, double entry does not.

• Single entry records transactions twice, double entry records them once.

• Single entry is more complex than double entry.

In double entry accounting, the net worth statement is constructed using ______ values rather than market values.

• cost basis

• market

• adjusted

• current

What is the equation for a Net Worth Statement (Balance Sheet)?

• A) Assets = Liabilities + Owner's Equity

• B) Assets = Liabilities - Owner's Equity

• C) Assets + Liabilities = Owner's Equity

• D) Assets - Liabilities = Owner's Equity

In double entry accounting, the debit is always listed on the ______ side of the account.

• Right

• Left

• Top

• Bottom

What is the total amount entered as credit in Account One?

• $1,000

• $2,000

• $3,000

• $4,000

In an asset account, a debit will ______ the account balance.

• Increase

• Decrease

• Not affect

In Example Transaction 2, what happens to the Seed Corn Inventory asset account when the seed corn is planted?

• It is debited by $1,000

• It is credited by $1,000

• It remains unchanged

• It is debited by $2,000.

In Example Transaction 3, the Fertilizer Inventory asset account is reduced to zero after applying $2,000 of fertilizer. What is the new balance of the Growing Corn asset account?

• $1,000

• $2,000

• $3,000

• $4,000

In Example Transaction 4, when the corn is harvested, the Growing Corn asset account is _______ by $3,000.

• A) debited

• B) credited

• C) unchanged

What happens to a liability account when a debit is made?

• It increases

• It decreases

• It remains unchanged

• It doubles