Basic Accounting Procedures Quiz
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Questions and Answers

What is the definition of the Double Entry System?

The system which recognizes and records both the aspects of transactions.

What are the advantages of Double Entry System? (Select all that apply)

  • Profit earned or loss suffered during a period can be ascertained together with details (correct)
  • Accuracy of accounting work can be established through the device of the trial balance (correct)
  • Results of one year may be compared with those of previous years and reasons for the change may be ascertained (correct)
  • Financial position of the firm or the institution concerned can be ascertained at the end of each period (correct)
  • Accounts can be kept in as much details as necessary (correct)

What is the basic accounting equation?

Assets = Liabilities + Capital

Debit entries are made on the right-hand side of the accounts for assets and credit entries are made on the left-hand side of the accounts for liabilities.

<p>False (B)</p> Signup and view all the answers

What accounts relate to persons, institutions, debtors or creditors?

<p>Personal Accounts</p> Signup and view all the answers

What accounts relate to assets of the firm but not debt?

<p>Real Accounts</p> Signup and view all the answers

What accounts relate to expenses, losses, gains, revenue, etc.?

<p>Nominal Accounts</p> Signup and view all the answers

Match the following account types with their correct rules:

<p>Personal Account = Debit the receiver, Credit the giver. Real Account = Debit what comes in, Credit what goes out. Nominal Account = Debit expenses and losses, Credit income and gains.</p> Signup and view all the answers

What is the journal?

<p>It is the book of original entry in which transactions are entered on a daily basis in a chronological order.</p> Signup and view all the answers

Which of the following accounts is not a real account?

<p>Rent (D)</p> Signup and view all the answers

Which of the following is an example of a Nominal Account?

<p>Rent (C)</p> Signup and view all the answers

The net result of all nominal accounts is reflected in the capital account.

<p>True (A)</p> Signup and view all the answers

The term “debit” always indicates a negative balance.

<p>False (B)</p> Signup and view all the answers

Flashcards

Double-Entry System

A system of accounting where every transaction has two equal and opposite effects recorded in the accounting books.

Account

A record of transactions related to a specific asset, liability, owner's equity, revenue, or expense.

Personal Account

An account belonging to an individual or a business entity, (e.g. suppliers, customers, or employees).

Real Account

An account that records assets and liabilities (e.g., cash, buildings, or land).

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Nominal Account

An account that records revenues and expenses (e.g. sales, salaries, or rent expenses).

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Debit

An accounting entry that increases the balance of asset, expense, and dividend accounts, and reduces the balance of liability, owner's equity, and revenue accounts.

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Credit

An accounting entry that increases the balance of liability and owner's equity accounts, and reduces the balance of asset and expense accounts.

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Source Documents

Original documents that provide evidence and justification for transactions.

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Books of Original Entry

Journal entries are recorded in the original books of entry.

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Ledger Accounts

Formal records where various financial transactions related to a single account are kept.

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Trial Balance

A summary of the balances of all general ledger accounts in a business's accounting system as of a particular date.

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Luca Pacioli

An Italian mathematician who is credited with describing the Double-Entry system in writing.

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Natural Account

Account created directly to reflect owner's or business's capital and other assets or credit.

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Representative Account

Account created following a business transaction; used to represent accounts held by other parties.

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Artificial Account

An account that is created in the books of accounts but does not represent any tangible assets or liabilities.

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Accounting Equation

An equation that illustrates the fundamental balance in accounting: Assets = Liabilities + Equity.

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Asset

Something of value owned by a business or an individual.

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Liability

An obligation owed to another party.

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Owner's Equity

The owner's residual interest in the assets of a business after deducting liabilities.

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Revenue

Income generated from the sale of goods or services.

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Expense

Costs incurred in the process of generating revenue.

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Study Notes

Accounting Process

  • This document covers basic accounting procedures, journal entries, and the double-entry system.
  • Understanding the double-entry system is key to accurate accounting.
  • Source documents like purchase day books, cash books, and sales day books provide evidence of transactions.
  • Ledgers record information related to specific assets, liabilities, capital, income, and expenses.
  • Trial balances summarize totals from various accounts, helping to verify accuracy.
  • Accounts are classified into personal, real, and nominal categories for better organization.
  • Personal accounts relate to individuals or businesses.
  • Real accounts relate to physical assets (e.g., land, buildings).
  • Nominal accounts relate to expenses, losses, gains, and revenues.
  • Debits and credits are used to record increases and decreases in account balances, respectively.
  • The accounting equation (Assets = Liabilities +Equity) must remain balanced for every transaction.
  • The journal is where initial transactions are recorded in chronological order.
  • The journal entries must be balanced—debit and credit totals must equal one another.

Double Entry System

  • The double-entry system is a fundamental accounting method.
  • Two accounts are impacted by each transaction.
  • Increases in assets are recorded with a debit.
  • Increases in liabilities and equity are recorded with a credit.
  • Increases in expenses are recorded with a debit.
  • Increases in revenues are recorded with a credit.

Accounting Equation

  • Assets = Liabilities + Equity
  • This equation must balance after every transaction.

Debits and Credits

  • In accounting, debit (Dr.) represents increases in assets and decreases in liabilities and equity.
  • Credit (Cr.) represents increases in liabilities and equity, and decreases in assets.

Accounts

  • Natural personal accounts relate to individuals or entities.
  • Artificial (legal) personal accounts relate to organizations.
  • Representative personal accounts represent obligations or claims.
  • Real accounts pertain to tangible assets.
  • Nominal accounts encompass temporary items like expenses and revenues.

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Description

Test your knowledge on fundamental accounting processes including journal entries, the double-entry system, and account classifications. This quiz will help reinforce your understanding of key concepts such as debits, credits, and the accounting equation. Perfect for students learning the basics of accounting.

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