Understanding Double Entry Accounting

What is the primary purpose of double entry accounting?

• To ensure that all transactions are recorded twice for accuracy

• To provide a complete record of all transactions by recording both debit and credit entries

• To simplify the accounting process by using a single entry system

• To reduce the number of accounts needed in the ledger

In double entry accounting, what does a debit entry typically signify?

• An increase in liabilities

• An increase in assets

• A decrease in expenses

• A decrease in revenue

What is the effect of a credit entry on an expense account?

• It increases the expense

• It decreases the expense

• It has no effect

• It transfers the expense to a liability

What is the primary rule for recording transactions in double entry accounting?

• Every transaction must be recorded in at least two accounts

• Every transaction must be recorded in a single account

• Transactions should only be recorded if they involve cash

• Transactions should be recorded at the end of the financial year

What is the effect of a debit entry on a liability account?

• It increases the liability

• It decreases the liability

• It has no effect

• It transfers the liability to an asset

In double entry accounting, what does a credit entry typically signify?

• An increase in assets

• An increase in liabilities

• A decrease in equity

• A decrease in revenue

Which of the following is a fundamental accounting equation?

• Revenue = Expenses + Profit

• Assets = Liabilities + Equity

• Cash = Revenue - Expenses

• Liabilities = Assets - Equity

What is the effect of a credit entry on a Owner's Equity account?

• It increases the equity

• It decreases the equity

• It has no effect

• It transfers the equity to a liability