Mastering Bookkeeping Concepts

What is the fundamental principle of double-entry bookkeeping?

• Transactions can be recorded without any documentation.

• All accounts must have a zero balance at all times.

• Every transaction affects only one account.

• Every transaction affects at least two accounts, maintaining balance in the accounting equation.

How does double-entry bookkeeping ensure accuracy in financial records?

• It uses random sampling to check for errors.

• Double-entry bookkeeping ensures accuracy by requiring that every transaction is recorded in two accounts, maintaining balance and enabling error detection.

• It records transactions in a single account for simplicity.

• It relies on manual calculations to verify totals.

What are the two main types of journal entries?

• Adjusting entries and closing entries

• Initial entries and final entries

• Transaction entries and summary entries

• Debit entries and credit entries

Can you give an example of a compound journal entry?

• Debit Salaries Expense $5,000; Debit Payroll Tax Expense $1,000; Credit Cash $6,000.

• Debit Office Supplies $1,500; Credit Inventory $1,500.

• Debit Utilities Expense $2,000; Credit Accounts Payable $2,000.

• Debit Rent Expense $3,000; Credit Cash $3,000.

What is the purpose of a general journal in accounting?

• To prepare tax returns for businesses.

• To summarize financial statements at the end of the year.

• The purpose of a general journal in accounting is to record all financial transactions chronologically.

• To analyze market trends and forecasts.

How do you record a purchase of inventory in a journal entry?

• Debit Accounts Receivable, Credit Sales

• Debit Inventory, Credit Revenue

• Debit Inventory, Credit Accounts Payable (or Cash)

• Debit Cash, Credit Inventory

What is the difference between a debit and a credit?

• Debits and credits are the same and do not affect financial statements.

• Debits are used only for cash transactions, while credits are for non-cash transactions.

• Debits increase assets/expenses and decrease liabilities/equity; credits decrease assets/expenses and increase liabilities/equity.

• Debits decrease assets and increase liabilities; credits increase assets and decrease liabilities.

How do you post journal entries to the ledger?

• Summarize the journal entries in a report.

• Delete the journal entries after posting.

• Record the debit and credit amounts from the journal entries in the respective ledger accounts.

• Transfer the ledger entries to the journal.

What is the purpose of a ledger in accounting?

• To manage employee payroll records.

• To calculate taxes owed by a business.

• The purpose of a ledger in accounting is to record and organize all financial transactions.

• To create financial statements for investors.

What are the key components of a trial balance?

• Opening statements, closing arguments, evidence presentation

• Trial dates, witness testimonies, jury selection

• Account names, debit balances, credit balances.

• Legal fees, court documents, case summaries