Double Entry Book-keeping System Quiz: Test Your Knowledge

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Questions and Answers

What does every debit have in the Double Entry System?

Equal amount of credit

What is the method of recognizing and recording both aspects of a transaction called?

Double Entry System

In Double Entry System, where are the two aspects of a transaction recorded?

In two or more different accounts

What does the Double Entry System ensure the balancing of?

Trial Balance and Balance Sheet Signup and view all the answers

What does the Double Entry System provide a complete record of?

Every transaction Signup and view all the answers

What can be determined by preparing an Income Statement in the Double Entry System?

True operating result of an entity during an accounting period Signup and view all the answers

What is an asset in accounting?

An asset is a resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity. Signup and view all the answers

How are assets classified based on the period of usage?

Assets are classified as Current Assets and Non-current Assets. Signup and view all the answers

Define a Current Asset.

A Current Asset is an asset that is expected to be consumed/sold within one accounting period, held primarily for trading, or expected to be realized within one accounting period. Signup and view all the answers

What is a Non-current Asset?

Any asset other than a current asset is referred to as a Non-current Asset. Signup and view all the answers

How are assets classified based on the certainty of realization?

Assets are classified into Monetary and Non-monetary categories based on the certainty of realization. Signup and view all the answers

What is a Monetary Asset?

A Monetary Asset is an asset that has a fixed exchange cash value and can be converted into a fixed and known amount of cash. Signup and view all the answers

Define a Non-monetary Asset.

A Non-monetary Asset is an asset that does not have a fixed exchange cash value and its realizable value depends on prevailing economic conditions. Signup and view all the answers

What are the three main categories of non-current assets?

The three main categories of non-current assets are Fixed Asset, Non-current Investments, and Other Non-current Assets. Signup and view all the answers

What is considered a fixed asset?

An asset intended to be used for producing or providing goods or services, not held for sale, and expected to be used for more than one accounting period is considered a fixed asset. Signup and view all the answers

Give an example of a non-monetary asset.

An example of a non-monetary asset is a fixed asset, such as a building, plant, or furniture. Signup and view all the answers

Study Notes

Double Entry System

Every debit has a corresponding credit in the Double Entry System.
The method of recognizing and recording both aspects of a transaction is called Double Entry System.
The two aspects of a transaction are recorded in two separate accounts: one debit and one credit.

Balancing and Recording

The Double Entry System ensures the balancing of debits and credits.
The system provides a complete record of all transactions, including assets, liabilities, and equity.

Financial Statement Analysis

Preparing an Income Statement in the Double Entry System allows determining the profitability of a business.

Assets

An asset is a resource owned or controlled by a business that is expected to generate future economic benefits.
Assets are classified into two categories based on the period of usage: Current Assets and Non-current Assets.
Current Assets are expected to be converted into cash or used up within one year or less.
Non-current Assets are expected to be used for more than one year.

Classification of Assets

Assets can be classified based on the certainty of realization into Monetary Assets and Non-monetary Assets.
Monetary Assets are assets with a fixed value in terms of money, such as cash and accounts receivable.
Non-monetary Assets are assets with no fixed value in terms of money, such as inventory, property, and equipment.
The three main categories of non-current assets are Property, Plant, and Equipment (Fixed Assets), Investments, and Intangible Assets.
Fixed Assets are tangible assets used in the operation of a business, such as land, buildings, and machinery.
Example of a non-monetary asset: inventory.

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Description

Explore the concept of double entry book-keeping system and its features. Understand the systematic method of recognizing and recording both aspects of a transaction in accounting.