Double Entry - Assets, Liabilities and Capital

What is the fundamental principle of the double entry system?

• Each transaction affects only one account

• Each transaction affects two accounts - one debit and one credit

• Each transaction affects three accounts simultaneously

• Transactions only affect liabilities

When an asset increases, which type of entry is recorded?

• Credit entry

• No entry required

• Debit entry

• Both debit and credit

How is a decrease in capital recorded?

• Debit entry

• No entry needed

• Both debit and credit

• Credit entry

In the IN and OUT approach, what does the "IN" side represent?

• Credit side

• Neither side

• Both sides

• Debit side

When a liability increases, what type of entry is made?

• No entry needed

• Debit entry

• Both debit and credit

• Credit entry

What happens when you pay cash to buy machinery?

• Credit machinery, debit cash

• Debit both accounts

• Debit machinery, credit cash

• Credit both accounts

What is the normal balance for assets and expenses

• Credits

• Debits

• Neither debit nor credit

• Both debit and credit

The credit side in accounting represents

• Decreases in capital

• Increases in assets

• Increases in liabilities and capital

• Decreases in liabilities

A T-account has which two sides?

• Top and bottom

• Debit and credit

• In and out

• Asset and liability

Revenue/Income is always recorded as a:

• Both debit and credit

• Credit entry

• No entry

• Debit entry