5 Questions
In double-entry bookkeeping, what is the purpose of requiring every entry to an account to have a corresponding and opposite entry to a different account?
To prevent financial errors and fraud
What does a transaction in double-entry bookkeeping always include?
At least one debit and one credit
What does the accounting equation serve as in double-entry bookkeeping?
An error detection tool
If a business takes out a bank loan for $10,000, how would this transaction be recorded in a general ledger under double-entry bookkeeping?
Debit of $10,000 to an asset account called 'Cash' and a credit of $10,000 to a liability account called 'Loan Payable'
What happens if the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts in double-entry bookkeeping?
An error has occurred
Study Notes
Double-Entry Bookkeeping
- The purpose of requiring every entry to an account to have a corresponding and opposite entry to a different account is to ensure that the accounting equation remains balanced.
Transaction Components
- A transaction in double-entry bookkeeping always includes a debit and a credit.
Accounting Equation
- The accounting equation serves as the foundation of double-entry bookkeeping, ensuring that the total value of assets equals the total value of liabilities and equity.
Transaction Recording
- When a business takes out a bank loan for $10,000, the transaction would be recorded in a general ledger by debiting Cash (asset account) and crediting Loan Payable (liability account) by $10,000 each.
Error Detection
- If the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts in double-entry bookkeeping, it indicates an error in the recording of transactions, which must be identified and corrected to maintain the integrity of the financial records.
Test your knowledge of double-entry bookkeeping with this quiz! Explore the principles of this foundational accounting method, including debits, credits, and the balancing of accounts.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
