Double Entry Accounting Entries

Front

What is the basic principle of double entry accounting?

Back

Each transaction affects at least two accounts with equal debits and credits

Answer explanation

The basic principle of double entry accounting is that each transaction impacts at least two accounts, ensuring that debits equal credits. This maintains the accounting equation and provides a complete financial picture.

Front

When a sole proprietor invests cash into the business, which accounts are affected?

Back

Debit Cash, Credit Capital

Answer explanation

When a sole proprietor invests cash, the Cash account increases (debit) and the owner's equity (Capital) increases (credit). Thus, the correct entry is Debit Cash, Credit Capital.

Front

How would you record the purchase of inventory on credit?

Back

Debit Inventory, Credit Accounts Payable

Answer explanation

To record the purchase of inventory on credit, you debit Inventory to increase it and credit Accounts Payable to reflect the obligation to pay the supplier. Thus, the correct entry is Debit Inventory, Credit Accounts Payable.

Front

Which accounts are debited and credited when goods are sold for cash?

Back

Debit Cash, Credit Sales

Answer explanation

When goods are sold for cash, Cash is debited to reflect the increase in assets, and Sales is credited to recognize the revenue earned. Thus, the correct entry is Debit Cash, Credit Sales.

Front

What entry is made when the proprietor withdraws cash for personal use?

Back

Debit Drawings, Credit Cash

Answer explanation

When the proprietor withdraws cash for personal use, the correct entry is to debit Drawings (increasing the owner's withdrawals) and credit Cash (decreasing the cash asset). Thus, the correct choice is Debit Drawings, Credit Cash.

Front

If a business pays rent, what is the double entry for this expense?

Back

Debit Rent Expense, Credit Cash/Bank

Answer explanation

The correct entry for paying rent is to debit Rent Expense, which increases the expense account, and credit Cash/Bank, which decreases the cash account. This reflects the outflow of cash for the rent payment.

Front

How is a credit sale recorded in the accounts?

Back

Debit Accounts Receivable, Credit Sales

Answer explanation

In a credit sale, the company sells goods on account. This means it will receive payment later. Therefore, we debit Accounts Receivable to record the amount owed and credit Sales to recognize the revenue earned.

Front

When the business receives cash from a customer, which accounts are involved?

Back

Debit Cash, Credit Accounts Receivable

Answer explanation

When cash is received from a customer, it increases the Cash account (debit) and decreases the Accounts Receivable account (credit), reflecting that the customer has paid their debt.

Front

What is the double entry for purchasing office equipment with cash?

Back

Debit Office Equipment, Credit Cash

Answer explanation

The correct entry for purchasing office equipment with cash is to debit Office Equipment, increasing its value, and credit Cash, decreasing cash on hand. This reflects the exchange of cash for an asset.

Front

How do you record the payment of a supplier’s invoice?

Back

Debit Accounts Payable, Credit Cash/Bank

Answer explanation

To record the payment of a supplier's invoice, you debit Accounts Payable to decrease the liability and credit Cash/Bank to reflect the cash outflow. This correctly shows that you have settled the invoice.