Bookkeeping Cycle Quiz No. 1

The given answer, "Credit," refers to an entry on the right side of an account. In accounting, credits are used to record increases in liabilities, revenues, and equity, or decreases in assets and expenses. This means that when a transaction increases any of these accounts, it is recorded as a credit entry. On the other hand, debit entries are made on the left side of an account and are used to record decreases in liabilities, revenues, and equity, or increases in assets and expenses. Therefore, in this context, the correct answer is "Credit."

Debit refers to an entry on the left side of an account. In accounting, every transaction has two sides - debit and credit. Debit represents an increase in assets or expenses, or a decrease in liabilities or revenues. It is recorded on the left side of an account to show the increase in value or decrease in a liability. This helps in maintaining the balance of the accounting equation, which states that assets must equal liabilities plus equity. Therefore, the correct answer is debit.

A ledger is a collection or compilation of accounts that records all financial transactions and balances for a specific period. It serves as a central repository of all the individual accounts, such as cash, sales, expenses, and assets, providing a comprehensive overview of the financial activities of an organization. By organizing and categorizing accounts, a ledger helps in tracking and analyzing financial data, ensuring accuracy and facilitating the preparation of financial statements. Therefore, the statement "A ledger is a compilation of accounts" is true.

The purpose of posting to a ledger is to ensure that deposits and charges are accurately recorded and assigned to the correct account. By posting transactions to the ledger, the financial information is organized and categorized, making it easier to track and analyze the activity for each specific account. This helps in maintaining accurate and up-to-date financial records and enables businesses to monitor their financial position effectively.

Bookkeeping is the correct answer because it involves the task of recording, classifying, and summarizing financial transactions and events. It is the process of keeping track of all financial activities within an organization, including recording transactions in journals, posting them to ledgers, and preparing financial statements. Bookkeeping ensures that all financial information is accurately recorded and organized, providing a clear picture of the financial health of the business.