Introduction to Journaling in Accounting 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 journal and then in a ledger.

What does the accounting equation represent?

• Assets = Liabilities + Owner's Equity

• Assets + Liabilities = Owner's Equity

• Assets = Liabilities - Owner's Equity

• Assets + Owner's Equity = Liabilities

In double-entry accounting, if a business takes out a loan, how is this recorded?

• Increase in assets and decrease in liabilities

• Increase in assets and increase in liabilities

• Decrease in assets and decrease in liabilities

• Increase in liabilities and decrease in owner's equity

Which of the following is true about the double-entry system?

• It ensures that the accounting equation is always balanced.

• It is only used by large corporations.

• It requires transactions to be recorded in at least three accounts.

• It is a newer system than single-entry accounting.

What happens to the accounting equation if a company purchases inventory on credit?

• Assets increase; Liabilities decrease.

• Assets decrease; Owner's Equity decreases.

• Assets increase; Liabilities increase.

• Liabilities decrease; Owner's Equity increases.

In the context of double-entry accounting, what does a debit entry in an asset account signify?

• A decrease in the asset

• An increase in the asset

• A decrease in owner's equity

• An increase in liabilities

Which of the following transactions would cause the owner's equity to increase?

• Borrowing money from a bank

• Purchasing supplies on credit

• Earning revenue from services provided

• Paying off a long-term debt

How does paying a utility bill affect the accounting equation?

• Decreases assets and decreases liabilities

• Decreases assets and decreases owner's equity

• Increases liabilities and decreases owner's equity

• Decreases liabilities and increases owner's equity

What is the effect of issuing common stock for cash on the accounting equation?

• Increases assets and increases liabilities

• Increases assets and increases owner's equity

• Decreases assets and decreases liabilities

• Decreases assets and decreases owner's equity

In double-entry accounting, what is the impact of recording a sale made on credit?

• Increases assets and decreases liabilities

• Increases assets and increases owner's equity

• Increases liabilities and decreases assets

• Decreases owner's equity and decreases assets