3.2 Recording transactions

Cards (53)

  • What is the fundamental principle of the double entry bookkeeping system?
    Every transaction affects two accounts
  • Debits decrease liabilities and equity.

    True
  • Debits increase the value of assets
  • What type of account is 'Cash' considered in the double entry system?
    Asset
  • Revenues are increased by debits.
    False
  • For every transaction, the total debits must equal the total credits
  • Every transaction in double entry bookkeeping keeps the accounting equation balanced.
    True
  • What account is debited when a business purchases office supplies for cash?
    'Office Supplies'
  • What are the five primary types of accounts in the double entry bookkeeping system?
    Assets, liabilities, equity, revenues, expenses
  • What equation must remain balanced in the double entry bookkeeping system?
    Assets = Liabilities + Equity
  • What is a liability in accounting terms?
    Obligations to outside parties
  • What is an example of a revenue account?
    Sales Revenue
  • A debit (Dr) increases assets and expenses
  • What does a credit (Cr) increase in the accounting equation?
    Liabilities, equity, and revenues
  • Credits decrease assets and expenses.
    True
  • A credit to 'Accounts Payable' increases its liability
  • What effect does a credit have on 'Expenses'?
    Decreases them
  • Order the steps in recording the purchase of equipment for cash in the double entry system:
    1️⃣ Debit the 'Equipment' (Asset) account
    2️⃣ Credit the 'Cash' (Asset) account
  • A debit increases assets and expenses
  • The purchase of office supplies for cash results in a credit to the 'Cash' account
  • Each transaction in double entry bookkeeping ensures the accounting equation remains balanced.

    True
  • In the double entry bookkeeping system, there are five primary types of accounts
  • What is an example of an asset account?
    Cash
  • Equity represents the owner's stake in the business.

    True
  • What is an example of an expense account?
    Salaries
  • When a business receives cash for services, the cash account is debited.
    True
  • In the double-entry bookkeeping system, there are five main types of accounts
  • If a business purchases office supplies for cash, which asset account is debited?
    Office Supplies
  • What is the fundamental principle behind the double entry bookkeeping system?
    Every transaction affects two accounts
  • If a business purchases office supplies for cash, the cash account is credited.
    True
  • Assets are increased by a credit entry.
    False
  • Equity is increased by a debit entry.
    False
  • Steps to record a transaction using the double entry bookkeeping system
    1️⃣ Identify affected accounts
    2️⃣ Determine debit and credit entries
    3️⃣ Update ledger accounts
  • Debiting an asset account decreases its balance.
    False
  • Crediting equity increases its balance.

    True
  • What type of entry increases the balance of expenses?
    Debit
  • What account is debited when office supplies are purchased for cash?
    Office Supplies
  • Steps to record a transaction using the double entry bookkeeping system
    1️⃣ Identify affected accounts
    2️⃣ Determine debit and credit entries
    3️⃣ Update ledger accounts
  • Balancing accounts ensures that the total debits equal the total credits
  • The rules of debit and credit determine how transactions affect different types of accounts