Principles Of Double Entry Bookkeeping Quiz

Double-entry involves two entries because it is a fundamental principle of accounting where every transaction has two effects. One entry is made to debit one account, and the other entry is made to credit another account. This ensures that the accounting equation (assets = liabilities + equity) remains balanced. The double-entry system provides a systematic and accurate way of recording financial transactions and helps in maintaining the accuracy and integrity of financial statements.

The DEBIT entry is always recorded on the left hand side. In accounting, the left side of an account is referred to as the debit side, while the right side is called the credit side. Debits are used to record increases in assets and expenses or decreases in liabilities and equity. This convention is based on the double-entry bookkeeping system, where every transaction has equal debits and credits. Therefore, the correct answer is left.

The statement is true because an account is typically identified by its name. The name of the account is usually displayed at the top or in the header section of the account, allowing users to easily identify and locate the account they are looking for. This naming convention helps organize and distinguish different accounts, making it easier for users to manage and navigate through their accounts effectively.

The format of a double entry account is similar to the letter T and is often called a T account. In a T account, the account name is written at the top of the T, and the left side of the T represents the debit side, while the right side represents the credit side. This format allows for the recording of both sides of a transaction and ensures that the accounting equation (assets = liabilities + equity) is always in balance.

When payment of insurance is made through the bank, it involves entries in two accounts: the Insurance Account and the Bank Account. The Insurance Account is debited to record the payment made for insurance, while the Bank Account is credited to show the outflow of funds from the bank. This transaction ensures that the payment is properly recorded in both the insurance records and the bank records. The other two accounts mentioned, Petty Cash Account and Rent Account, are not relevant to the payment of insurance through the bank.

In double-entry accounting, the debit side is on the left, not the right. This is because the debit side represents the increase in assets and expenses, while the credit side represents the increase in liabilities, equity, and revenue. Therefore, the correct answer is false.

When a tenant pays rent, it is considered as income for the landlord. Therefore, the entry for the rent paid by the tenant will be recorded in the Rent Received Account. This account is used to track all the rent payments received by the landlord. The other options mentioned, such as the bank account, office expenses account, and insurance account, do not directly relate to the receipt of rent paid by a tenant.

This answer is correct because sales is a common source of payment into a bank account. When a business makes sales, customers typically pay for their purchases using various payment methods such as cash, credit cards, or electronic transfers. These payments are then deposited into the business's bank account, increasing the balance. Therefore, sales can be considered as a type of payment into a bank account.

In double-entry accounting, the terms "debit" and "credit" have specific meanings that may differ from how banks use them. In accounting, a debit represents an increase in an asset or expense account, while a credit represents an increase in a liability, equity, or revenue account. Banks, on the other hand, often refer to debits as withdrawals and credits as deposits. Therefore, when using double-entry accounting, it is necessary to understand and apply the accounting definitions of debits and credits, rather than relying on the terminology used by banks. Hence, the statement "you must ignore the way banks refer to debits and credits" is true.

A bank account in the accounting system of a business can be thought of as a "mirror image" of the bank account held at the bank because it reflects the transactions and balances of the actual bank account. The accounting system mirrors the bank account by recording all deposits, withdrawals, and other transactions accurately, ensuring that the balances in both accounts match. This allows the business to keep track of its financial activities and reconcile its records with the bank's statements to ensure accuracy and accountability.