Accounting Concepts

What is the fundamental principle of double-entry accounting?

• Every credit has a corresponding debit.

• Every debit has a corresponding credit.

• Debits are not necessary.

• Double credits are allowed.

Explain the concept of debit and credit in double-entry accounting.

• Debit represents an increase in assets or expenses and a decrease in liabilities, equity, or revenue. Credit represents a decrease in assets or expenses and an increase in liabilities, equity, or revenue.

• Debit represents an increase in liabilities, equity, or revenue and a decrease in assets or expenses. Credit represents a decrease in liabilities, equity, or revenue and an increase in assets or expenses.

• Debit represents a decrease in assets or expenses and an increase in liabilities, equity, or revenue. Credit represents an increase in assets or expenses and a decrease in liabilities, equity, or revenue.

• Debit represents an increase in assets or expenses and a decrease in liabilities, equity, or revenue. Credit represents an increase in liabilities, equity, or revenue and a decrease in assets or expenses.

How does the double-entry system ensure accuracy in financial records?

• By using a single account for all transactions

• By only recording transactions as debits

• By recording each transaction in at least two accounts, one as a debit and the other as a credit.

• By ignoring certain transactions

Give an example of a transaction and demonstrate how it would be recorded using double-entry accounting.

• Debit Cash $200, Credit Accounts Receivable $200

• Debit Utilities Expense $300, Credit Accounts Payable $300

• Debit Office Supplies $500, Credit Accounts Payable $500

• Debit Equipment $1,000, Credit Accounts Payable $1,000

What is the purpose of the trial balance in double-entry accounting?

• To calculate the company's tax liability

• To track employee attendance

• To ensure total debits equal total credits in the accounting system.

• To determine the market value of assets