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Questions and Answers
What does the accounting equation state?
What does the accounting equation state?
Liabilities are things owned by the business.
Liabilities are things owned by the business.
False (B)
What is the purpose of double entry accounting?
What is the purpose of double entry accounting?
To record transactions in a way that keeps the accounting equation balanced.
Money coming in is referred to as ________.
Money coming in is referred to as ________.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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Which of the following is NOT an element of financial statements?
Which of the following is NOT an element of financial statements?
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Expenses decrease the capital of a business.
Expenses decrease the capital of a business.
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What is the effect of drawing on a business's capital?
What is the effect of drawing on a business's capital?
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The golden rule of double entry states that ________ equals Capital plus Profit minus Drawings.
The golden rule of double entry states that ________ equals Capital plus Profit minus Drawings.
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When a business buys a motor vehicle on credit, how does it affect the financial statements?
When a business buys a motor vehicle on credit, how does it affect the financial statements?
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Which accounting equation reflects the relationship between assets, liabilities, and capital?
Which accounting equation reflects the relationship between assets, liabilities, and capital?
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A business's purchases increase assets.
A business's purchases increase assets.
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What is the purpose of a trial balance?
What is the purpose of a trial balance?
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A loan from the bank is classified under __________.
A loan from the bank is classified under __________.
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Match the account type to its category:
Match the account type to its category:
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What does the acronym DEAD represent?
What does the acronym DEAD represent?
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Expenses increase when they are debited.
Expenses increase when they are debited.
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Define a financial transaction.
Define a financial transaction.
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When the owner's capital increases, it shows a __________ effect on the accounting equation.
When the owner's capital increases, it shows a __________ effect on the accounting equation.
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In a double-entry accounting system, what must always be true?
In a double-entry accounting system, what must always be true?
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Credit is recorded on the left side of a T-account.
Credit is recorded on the left side of a T-account.
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What happens when a business pays off its accounts payable?
What happens when a business pays off its accounts payable?
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Income from sales is categorized under __________ account.
Income from sales is categorized under __________ account.
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Which of the following represents an increase in liabilities?
Which of the following represents an increase in liabilities?
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What type of transaction occurs when a customer receives goods and pays at a later date?
What type of transaction occurs when a customer receives goods and pays at a later date?
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A customer pays for goods with cash and collects them the same day in a credit transaction.
A customer pays for goods with cash and collects them the same day in a credit transaction.
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What was the initial capital invested to start the business?
What was the initial capital invested to start the business?
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A customer sold goods worth £3000 and the customer paid by _______.
A customer sold goods worth £3000 and the customer paid by _______.
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Match the following transaction dates with their corresponding activities:
Match the following transaction dates with their corresponding activities:
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Which transaction type requires a customer to pay later?
Which transaction type requires a customer to pay later?
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Purchases Returns Account is used to track goods returned to suppliers.
Purchases Returns Account is used to track goods returned to suppliers.
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What payment method was used to purchase the computer?
What payment method was used to purchase the computer?
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A customer received a bank transfer for £175 from _______.
A customer received a bank transfer for £175 from _______.
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Match the companies with their respective transactions:
Match the companies with their respective transactions:
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Which of the following represents a payments activity?
Which of the following represents a payments activity?
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Returns Outwards are transactions where goods are returned to the business.
Returns Outwards are transactions where goods are returned to the business.
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What was the amount paid to Melvin Manufacturing Company?
What was the amount paid to Melvin Manufacturing Company?
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The ________ account records the amount paid to suppliers.
The ________ account records the amount paid to suppliers.
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Study Notes
Birmingham International Academy - Week 2 Lecture: Introduction to Double Entry
- The lecture covers introduction to financial and management accounting.
- The aim is to enable learners to record transactions using double entry.
- Key learning outcomes include:
- Recording cash transactions
- Recording credit transactions
- Recording transactions involving returns of goods
- Balancing accounts
- Posting account balances to the trial balance
Elements of Financial Statements
- Assets: Things owned by the business (belong to the business)
- Liabilities: Money owed by the business (belongs to others outside the business)
- Income: Money coming in
- Expenditure: Money going out
- Drawings: Money taken out of the business by the owner
- Capital: Money invested by the owner into the business
The Accounting Equation
- Assets = Liabilities + Capital
- Everything owned by a business = Money borrowed from external lenders + Money invested by the owners
- Assets items in a business can be paid or not be paid off and still have future benefits
- Liabilities represents probable future outflow of assets from a past transaction
The Double Entry Golden Rule
- Assets - Liabilities = Capital
- Assets - Liabilities = Capital + Profit - Drawings
- Expenses + Assets + Drawings = Liabilities + Income + Capital
Example Transactions
- Specific examples of transactions are shown in table formats.
- These examples demonstrate debit and credit entries.
- The transactions show how financial events impact accounts.
Transaction Analysis
- Different types of transactions are identified, including cash transactions and credit transactions
- Transactions can affect Assets, Liabilities, Capital, Income, and Expenses
- Debit is listed on the left and credit on the right.
Identifying Account Types
- Specific accounts for a business are listed in a trial balance - this is an example set of accounts for a business called "Computrade".
Account Types
- Different account types are shown in a trial balance example
Glossary
- Terms like "financial transaction," "cash transactions," and "credit transactions" are precisely defined. Key terms are listed.
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Description
Test your knowledge on fundamental accounting concepts, including the accounting equation, double entry accounting, and financial statements. This quiz will challenge your understanding of key principles and their applications in business scenarios.
