Introduction to Double Entry Accounting

Which of the following best describes the double entry accounting system?

• Every transaction affects only one account.

• Every transaction affects at least two accounts, with equal debits and credits.

• Only cash transactions are recorded.

• Only credit transactions are recorded.

In double entry accounting, what is the effect of purchasing equipment for cash?

• Increase in assets and increase in liabilities

• Increase in assets and decrease in another asset

• Increase in assets and increase in equity

• Decrease in assets and increase in liabilities

If a company receives $1,000 in cash from a customer for services rendered, which accounts are affected?

• Cash (debit), Service Revenue (credit)

• Cash (credit), Service Revenue (debit)

• Cash (debit), Accounts Payable (credit)

• Accounts Receivable (debit), Service Revenue (credit)

Which of the following equations represents the fundamental principle of double entry accounting?

• Assets = Liabilities + Expenses

• Assets = Liabilities + Owner’s Equity

• Assets = Revenues + Liabilities

• Assets = Owner’s Equity - Liabilities

A business pays $500 in cash to settle an account payable. What is the correct double entry?

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

• It only records income and expenses.

• It ensures that the accounting equation always remains balanced.

• It ignores non-cash transactions.

• It records only one side of each transaction.

If a company borrows $2,000 from a bank, what is the correct double entry?

Which account is credited when the owner invests additional cash into the business?

• Cash

• Owner’s Equity (Capital)

• Expense

• Accounts Receivable

A company pays rent of $300 in cash. What is the correct double entry?

Which of the following best explains why double entry accounting is important?

• It allows for single-sided recording of transactions.

• It helps detect errors and ensures the books are balanced.

• It is only used for large corporations.

• It eliminates the need for financial statements.