Double Entry Model

Question 1

What is the fundamental principle of the double entry model in accounting?

Answer 1

Every transaction has equal and opposite effects on two or more accounts.

Question 2

True or False: The double entry model is a system where each transaction is recorded twice.

Answer 2

True

Question 3

In the double entry model, what are the two sides of the accounting equation?

Answer 3

Assets = Liabilities + Equity

Question 4

What is the purpose of using the double entry model in accounting?

Answer 4

To ensure accuracy and maintain the balance in financial records.

Question 5

Fill in the blank: In the double entry model, every transaction must involve at least _____ accounts.

Answer 5

Two

Question 6

What is the term used to describe the process of recording a transaction in the double entry model?

Answer 6

Journal entry

Question 7

What is the name of the document that summarizes all the journal entries for a specific period in the double entry model?

Answer 7

Trial balance

Question 8

Multiple Choice: Which of the following is NOT an essential element of the double entry model? A) Assets B) Liabilities C) Expenses D) Equity

Answer 8

C) Expenses

Question 9

What is the term used for the process of transferring journal entries to the general ledger in the double entry model?

Answer 9

Posting

Question 10

True or False: The double entry model is a flexible system that can be easily manipulated to show desired financial results.

Answer 10

False

Question 11

What are the pros of a double entry model?

Answer 11

.Verification of arithmetical accuracy
.More information available - The bookkeeper will have a record, for example, of how much they are owed by trade receivables and owes trade payables
. Easier to prepare financial statements - All the balances are gathered in the trial
balance
. Reduce the liklihood of fraud/theft
. Evidence for loan applications

Question 12

Cons of the double entry model

Answer 12

. Lack of expertise- The business may not have the knowledge of double-entry bookkeeping and may need to take a training course or employ a bookkeeper or accountant.
. Cost- The business may need to either employ a bookkeeper, or be trained. However, an accountant would usually charge more to prepare accounts from incomplete records rather than records kept using double entry.
. Time - If the business decides to do the bookkeeping themselves then this may distract them from other parts of the business – opportunity cost!
. Does not detect ROCCOP errors