4. Double Entry Bookkeeping

Question 1

What is the separate entity concept in relation to double entry bookkeeping?

Answer 1

Even if the business is owned and operated by one person, double entry bookkeeping is based on the premise that the business is a separate entity, distinct from the owner.

Question 2

What are the 4 debit entries?

Answer 2

Drawings
Expense
Assets
Decrease in liabilities

Question 3

What are the 4 credit entries?

Answer 3

Capital
Liability
Income
Decrease in assets

Question 4

What are the two steps of closing the books (closing off the nominal ledger accounts)?

Answer 4

1. Add up the debits and credits of the T account and put the larger sum as the total of both sides
2. The difference between the debit and credit side is the balance carried foward

Question 5

The balancing figure is always brought forward on which side of the T account?

Answer 5

The opposite side - because it represents a balance on that side

Question 6

What is the double entry for topping up the petty cash book?

Answer 6

Dr Petty Cash

Cr Cash or Bank Account