Chap 4 Concept of Double entry

Question 1

How does a business record its business transactions?

Answer 1

Through a ledger account, and a business may have many ledger accounts

Question 2

A list of all the ledger accounts used by a business is known as

Answer 2

The Chart of accounts

Question 3

What is the format of the ledger accounts

Answer 3

Columnar format (computerised)
T-format (manual)

Question 4

What are columns found in the columnar ledger?

Answer 4

Date
Particulars
Debit
Credit
Balance

Question 5

What is unique about the design of the T-format ledger?

Answer 5

It has the shape of capital T
The account has 2 sides
Left side is debit
Right side is credit

Question 6

What are the double entry recording rules?

Answer 6

Each business transaction will have at least one debit entry to one account and at least one credit entry to another account
The total debit value must always equal the total credit entry for each transaction

Question 7

An increase/decrease in an asset is

Answer 7

debit/credit

Question 8

An increase/decrease in an liability is

Answer 8

credit/debit

Question 9

An increase/decrease in an equity is

Answer 9

credit/debit

Question 10

An increase/decrease in an income is

Answer 10

credit/debit

Question 11

An increase/decrease in an expense is

Answer 11

debit/credit

Question 12

A cash contribution from an owner in the cash in hand account and Capital account is considerded as

Answer 12

Debit increase in Cash in hand account

Credit increase in Capital account

Question 13

Cash obtained through borrwing in the cash in hand account and Bank Loan account is considered as

Answer 13

Debit increase in Cash in hand account

Credit increase in Bank Loan account

Question 14

A cash purchase of goods in the inventory account and Cash in Hand account is considered as

Answer 14

Debit increase in Inventory account

Credit decrease in Cash in hand account