Chapter 6 Double Entry P1

Question 1

What are the three main principles of double entry book-keeping?

Answer 1

1. The separate entry concept
2. There is always an accounting equation which always holds true
3. The dual effect of transactions

Question 2

What is the separate entity concept?

Answer 2

the owner of a business is a completely separate entity to the business itself.

Question 3

What is meant by the dual effect of transactions?

Answer 3

each and every transaction that a business undertakes has two effects on the business

Question 4

What are the 4 steps for balancing off accounts?

Answer 4

1. add up the debits and credits
2. Put the largest of the two totals as the total for both credit and debit columns
3. Calculate the balance figure on the side with the lower total and describe this as the balance c/d
4. show this balancing figure on the opposite side below the totals line and describe this figure as the balance b/d

Question 5

What is the general ledger

Answer 5

a collection of ledger accounts

Question 6

Where are the two effects (dual effect) of each transaction recorded?

Answer 6

Ledger accounts with a debit entry in one account and a credit entry in another account.

Question 7

What does a debit entry represent?

Answer 7

An increase in an asset
An item of expense
An increase in drawings
A decrease in liabilities, income or capital

Question 8

What does a credit entry represent?

Answer 8

An increase in a liability
An item of income
An increase in Capital
A decrease in assets, expenses or drawings.