Question 1 of 5
What is the fundamental principle of double-entry bookkeeping?
A
A) Each transaction affects only one account.
B
B) Every transaction affects at least two accounts.
C
C) Debits must always equal credits.
D
D) Assets are recorded on the credit side only.
Why: The fundamental principle of double-entry bookkeeping is that every financial transaction affects at least two accounts, with one account debited and another credited by equal amounts. This ensures the accounting equation (Assets = Liabilities + Equity) remains balanced. Option B correctly states this principle, as confirmed by standard accounting rules where debits equal credits for every transaction.[4]
Question 2 of 5
In double entry accounting, every accounting entry must be recorded: (a) once in a cash account, (b) twice in a cash book, (c) once on the debit side and once on the credit side of the ledger accounts, (d) once in the journal and once in the ledger.
A
A) Once in a cash account.
B
B) Twice in a cash book.
C
C) Once on the debit side and once on the credit side of the ledger accounts.
D
D) Once in the journal and once in the ledger.
Why: In double-entry accounting, every transaction is recorded with a debit entry in one account and an equal credit entry in another account within the ledger. This dual recording maintains balance in the accounting system. Option C accurately describes this core mechanism, distinguishing it from single-entry systems.[2]
Question 3 of 5
When a company receives cash from a customer for a previous credit sale, which accounts are affected?
A
A) Cash and Sales.
B
B) Cash and Accounts Receivable.
C
C) Accounts Receivable and Sales.
D
D) Cash and Revenue.
Why: Receiving cash from a customer for a previous credit sale increases Cash (debit) and decreases Accounts Receivable (credit). This settles the receivable without affecting sales revenue again, as the sale was already recorded. Option B correctly identifies the affected accounts.[4]
Question 4 of 5
Complete the following statements regarding books of prime entry: Books of ........... are books in which we first record transactions. The main books of prime entry are: (a) ........... day book (b) ............... day book (c) ........... returns day book (d) ............... returns day book (e) J........ (f) ........... book (g) ........... cash book.
Why: Books of prime entry (also called books of original entry) are the initial records where transactions from source documents like invoices are first entered before posting to ledgers. They include: Sales Day Book for credit sales, Purchase Day Book for credit purchases, Sales Returns Day Book, Purchase Returns Day Book, Journal for adjustments, Cash Book for cash transactions, and Petty Cash Book for small expenses. This system organizes data efficiently for double-entry posting.[1]
Question 5 of 5
State the basic rules of double-entry bookkeeping.
Why: Double-entry bookkeeping records each transaction twice to maintain accuracy and balance. The rules ensure debits equal credits, supporting the accounting equation. This method tracks all financial effects comprehensively, reducing errors compared to single-entry systems.[1][3]
