Understanding Bookkeeping Basics

What is the primary purpose of double-entry bookkeeping?

• To record transactions in a single account

• To ensure that the accounting equation remains balanced

• To simplify financial reporting

• To track cash flow only

In double-entry bookkeeping, what does a debit entry typically represent?

• An increase in liabilities

• A decrease in assets

• An increase in assets

• A decrease in expenses

Which of the following is true about credits in double-entry bookkeeping?

• Credits always increase asset accounts

• Credits always decrease liability accounts

• Credits increase liability and equity accounts

• Credits decrease revenue accounts

What is the accounting equation that double-entry bookkeeping is based on?

• Assets = Liabilities + Revenue

• Assets = Liabilities + Equity

• Assets = Expenses + Equity

• Assets = Liabilities - Equity

If a company purchases equipment for £500 using cash, how would this transaction be recorded?

• Debit Equipment £500, Credit Cash £500

• Debit Cash £500, Credit Equipment £500

• Debit Equipment £500, Credit Revenue £500

• Debit Cash £500, Credit Liabilities £500

Which account is typically debited when a company receives cash from a customer?

• Accounts Receivable

• Cash

• Revenue

• Accounts Payable

What happens to the equity account when a company earns revenue?

• It decreases

• It remains unchanged

• It increases

• It is debited

In double-entry bookkeeping, 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 increases the liability

Which of the following is an example of a liability account?

• Cash

• Accounts Payable

• Equipment

• Revenue

If a company pays off a £200 debt, how is this transaction recorded?

• Debit Cash £200, Credit Liabilities £200

• Debit Liabilities £200, Credit Cash £200

• Debit Revenue £200, Credit Cash £200

• Debit Cash £200, Credit Revenue £200