Double-Entry Bookkeeping: Master the Basics of Accounting

Question 1

In the accounting cycle, which step is the initial recording of transactions?

Accepted Answer

Journalizing

Answer

Posting

Answer

Trial balance

Answer

Financial statement preparation

Question 2

Which account type is typically increased by a debit?

Accepted Answer

Asset

Answer

Liability

Answer

Equity

Answer

Revenue

Question 3

Which transaction would result in a debit to the Cash account?

Accepted Answer

Receiving customer payment

Answer

Paying rent expense

Answer

Purchasing inventory on credit

Answer

Recording equipment depreciation

Question 4

Which account records the owner's initial investment?

Accepted Answer

Capital Account

Answer

Drawings Account

Answer

Loan Account

Answer

Reserve Account

Question 5

What is the chronological recording of transactions called?

Accepted Answer

Journalizing

Answer

Posting

Answer

Trial Balance

Question 6

What type of account balance represents the difference between debit and credit entries?

Accepted Answer

Net Balance

Answer

Closing Balance

Answer

Opening Balance

Question 7

Which document provides a comprehensive summary of the ledger account balances?

Accepted Answer

Trial Balance

Answer

General Ledger

Answer

Financial Statement

Question 8

What is the primary objective of the double-entry accounting system?

Accepted Answer

Ensuring equality of total debits and total credits

Answer

Recording transactions accurately in multiple accounts

Answer

Providing complete and reliable financial information

Question 9

Which of the following is considered an operational expense in a business?

Accepted Answer

Rent

Answer

Sales Revenue

Answer

Share Capital

Question 10

What is the purpose of a closing entry in accounting?

Accepted Answer

Transferring revenue and expense balances to retained earnings

Answer

Correcting errors in accounting records

Answer

Generating the trial balance

Question 11

What historical era marked the origin of the double-entry accounting system?

Accepted Answer

Medieval Italy

Answer

Ancient Greece

Answer

Victorian England

Question 12

Which of the following is a potential disadvantage of using double-entry bookkeeping?

Accepted Answer

Can be confusing for beginners

Answer

Ensures accuracy through self-balancing

Answer

Saves time using computerized systems

Answer

Helps detect potential fraud

Question 13

A company buys $1,000 of inventory on account. Which journal entry records this transaction?

Accepted Answer

Debit Inventory $1,000, Credit Accounts Payable $1,000

Answer

Debit Accounts Receivable $1,000, Credit Inventory $1,000

Answer

Debit Cash $1,000, Credit Accounts Payable $1,000

Answer

Debit Inventory $1,000, Credit Cash $1,000

Question 14

What is the initial step in the accounting cycle?

Accepted Answer

Journalizing transactions

Answer

Preparing a trial balance

Answer

Posting to ledger accounts

Answer

Preparing financial statements

Question 15

Which of the following is an example of an adjusting entry?

Accepted Answer

Depreciation of fixed assets

Answer

Recording the receipt of cash for services rendered

Answer

Payment of wages to employees

Answer

Purchase of inventory

Question 16

Which of the following is not a type of financial statement?

Accepted Answer

Budget

Answer

Balance sheet

Answer

Income statement

Answer

Cash flow statement

Question 17

What is the accounting equation?

Accepted Answer

Assets = Liabilities + Owners' Equity

Answer

Revenues - Expenses = Net Income

Answer

Current Assets = Current Liabilities

Answer

Total Assets = Total Liabilities

Question 18

In double-entry bookkeeping, each transaction is recorded twice, once as a debit and once as a credit to maintain balance in the accounting equation.

Accepted Answer

True

Answer

Once

Answer

Multiple times

Answer

False

Question 19

What is the initial step in the accounting cycle?

Accepted Answer

Journalizing transactions

Answer

Posting to ledger accounts

Answer

Adjusting entries

Answer

Preparing a trial balance

Question 20

When recording a transaction that increases an asset, which side of the account is debited?

Accepted Answer

Left

Answer

Right

Answer

Neither side

Answer

Both sides

Question 21

What is the primary purpose of a trial balance?

Accepted Answer

To check the equality of total debits and total credits, ensuring the accounting equation is balanced.

Answer

To close the accounting records

Answer

To calculate net income

Answer

To prepare the financial statements

Question 22

How can debits be distinguished from credits?

Accepted Answer

Debits increase assets and expenses, while credits increase liabilities, equity, and revenue.

Answer

Debits decrease assets and expenses, while credits decrease liabilities, equity, and revenue.

Answer

Debits increase liabilities and expenses, while credits increase assets, equity, and revenue.

Question 23

Which of the following is an example of a closing entry?

Accepted Answer

Transferring net income to retained earnings

Answer

Adjusting for depreciation

Answer

Recording the purchase of inventory

Question 24

What is the purpose of an adjusting entry?

Accepted Answer

To update account balances to reflect economic events that have occurred but have not yet been recorded.

Answer

To close the accounting records

Answer

To correct errors made in previous entries

Question 25

Which of the following is NOT considered a permanent account?

Accepted Answer

Sales

Answer

Land

Answer

Accumulated Depreciation

Answer

Capital

Question 26

What is the fundamental difference between a journal and a ledger?

Accepted Answer

A journal records transactions chronologically, while a ledger organizes transactions by specific accounts.

Answer

A journal and a ledger are the same.

Answer

A ledger records transactions chronologically, while a journal organizes transactions by specific accounts.

Question 27

Which of the following is a type of financial statement?

Accepted Answer

Balance sheet

Answer

Trial balance

Answer

Journal

Question 28

Which of the following is the first step in the accounting cycle?

Accepted Answer

Journalizing transactions

Answer

Posting to ledger accounts

Answer

Closing the books

Answer

Preparation of trial balance

Question 29

What is the purpose of a debit entry?

Accepted Answer

To increase an asset or expense account

Answer

To increase a liability or revenue account

Answer

To decrease a liability or revenue account

Answer

To decrease an asset or expense account

Question 30

Which type of account is used to record the capital invested in a business?

Accepted Answer

Capital account

Answer

Current account

Answer

Loan account

Question 31

Which of the following transactions would result in a credit to the Cash account?

Accepted Answer

Receiving payment for goods sold

Answer

Paying rent expense

Answer

Borrowing money from the bank

Answer

Purchasing inventory on credit

Question 32

What is the purpose of a trial balance?

Accepted Answer

To ensure that the total debits equal the total credits

Answer

To record the financial transactions of a business

Answer

To prepare the financial statements

Answer

To summarize the balances of all accounts

Question 33

Which of the following documents is the source of information for journalizing transactions?

Accepted Answer

Source documents

Answer

Financial statements

Answer

Trial balance

Answer

Accounting textbook

Question 34

What is the purpose of closing entries?

Accepted Answer

To transfer balances from temporary to permanent accounts

Answer

To prepare the trial balance

Answer

To record the financial transactions of a business

Question 35

Which of the following financial statements summarizes the financial performance of a business over a specific period?

Accepted Answer

Income statement

Answer

Statement of cash flows

Answer

Balance sheet

Answer

Statement of changes in equity

Question 36

Which of the following is an example of an adjusting entry?

Accepted Answer

Recording depreciation expense

Answer

Cash received from a customer

Answer

Purchase of supplies on account

Answer

Payment of wages to employees

Question 37

Identify the first step in the accounting cycle:

Accepted Answer

Journalizing transactions

Answer

Preparing a trial balance

Answer

Posting to ledger accounts

Answer

Preparing financial statements

Question 38

Which type of account is utilized to record assets in the accounting system?

Accepted Answer

Asset account

Answer

Income account

Answer

Liability account

Answer

Equity account

Question 39

What is the primary purpose of a trial balance?

Accepted Answer

To verify the equality of total debits and total credits

Answer

To calculate profit or loss

Answer

To record all transactions

Answer

To prepare financial statements

Question 40

Which of the following books of original entry is specifically designed to record transactions related to cash?

Accepted Answer

Cash Book

Answer

Returns Book

Answer

Purchases Journal

Answer

Sales Journal

Question 41

When purchasing inventory on account, the accounting entry will include:

Accepted Answer

Debit Inventory; Credit Accounts Payable

Answer

Debit Inventory; Credit Cash

Answer

Debit Cash; Credit Accounts Payable

Answer

Debit Accounts Payable; Credit Inventory

Question 42

Which of the following accounts is considered a contra-asset account?

Accepted Answer

Accumulated Depreciation

Answer

Accounts Receivable

Answer

Cash

Answer

Prepaid Rent

Question 43

What is the main objective of closing entries?

Accepted Answer

Transfer temporary account balances to permanent accounts

Answer

Record transactions

Answer

Prepare a trial balance

Question 44

Explain the concept of duality in accounting:

Accepted Answer

Every transaction has two equal and opposite effects on the accounting equation

Answer

Assets are always equal to liabilities

Answer

Debits must always equal credits

Question 45

Which type of transaction increases both an asset and a liability account?

Accepted Answer

Taking out a bank loan

Answer

Selling merchandise for cash

Answer

Purchasing inventory on account

Answer

Paying rent for the month with cash

Question 46

What is the primary purpose of a journal in double-entry bookkeeping?

Accepted Answer

To record transactions chronologically

Answer

To summarize transactions by account

Answer

To reconcile bank statements

Answer

To prepare financial statements

Question 47

What is the main purpose of a trial balance?

Accepted Answer

To check the equality of debits and credits in the ledger

Answer

To prepare financial statements

Answer

To record adjusting entries

Answer

To summarize transactions by account

Question 48

Which of the following is an example of a real account?

Accepted Answer

Inventory

Answer

Prepaid expenses

Answer

Deferred revenue

Question 49

What is the conceptual foundation of the double-entry bookkeeping system?

Accepted Answer

The accounting equation

Answer

The statement of cash flows

Answer

The income statement

Answer

The balance sheet

Question 50

What is the main purpose of closing entries in the accounting cycle?

Accepted Answer

To transfer balances from temporary to permanent accounts

Answer

To adjust account balances

Answer

To summarize transactions

Question 51

Which of the following is an example of a contra account?

Accepted Answer

Accumulated Depreciation

Answer

Inventory

Answer

Accounts Receivable

Answer

Prepaid Rent