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Questions and Answers
Which of the following best describes double-entry bookkeeping?
Which of the following best describes double-entry bookkeeping?
- A method of bookkeeping that relies on multiple-sided accounting entries
- A method of bookkeeping that relies on a two-sided accounting entry (correct)
- A method of bookkeeping that does not require accounting entries
- A method of bookkeeping that relies on a single-sided accounting entry
What are the two equal and corresponding sides in the double-entry system called?
What are the two equal and corresponding sides in the double-entry system called?
- Equity and revenue
- Debit and credit (correct)
- Income and expense
- Assets and liabilities
How many accounts does a transaction in double-entry bookkeeping always affect?
How many accounts does a transaction in double-entry bookkeeping always affect?
- Only one account
- Three accounts
- At least two accounts (correct)
- No accounts
What is the purpose of double-entry bookkeeping?
What is the purpose of double-entry bookkeeping?
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If a business takes out a bank loan for $10,000, which accounts will be affected?
If a business takes out a bank loan for $10,000, which accounts will be affected?
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Study Notes
Double-Entry Bookkeeping
- Double-entry bookkeeping is an accounting system where each transaction is recorded twice, once as a debit and once as a credit.
Characteristics of Double-Entry System
- The two equal and corresponding sides in the double-entry system are called Debits and Credits.
- A transaction in double-entry bookkeeping always affects at least two accounts.
Purpose of Double-Entry Bookkeeping
- The purpose of double-entry bookkeeping is to ensure accuracy, completeness, and consistency of financial records.
Example: Bank Loan Transaction
- If a business takes out a bank loan for $10,000, the accounts affected would be:
- Cash (or Bank) account (increased by $10,000)
- Loan Payable account (increased by $10,000)
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