The Double-Entry System

Question 1

In the double-entry system, every transaction has

Accepted Answer

two equal effects: one debit and one credit — Double entry means two equal effects for every transaction.

Question 2

An increase in assets is recorded on the

Accepted Answer

debit side — Assets increase on the debit side.

Question 3

An increase in liabilities is recorded on the

Accepted Answer

credit side — Liabilities increase on the credit side.

Question 4

An increase in expenses is recorded on the

Accepted Answer

debit side — Expenses increase on the debit side.

Question 5

An increase in income is recorded on the

Accepted Answer

credit side — Income increases on the credit side.

Question 6

Capital brought in by the owner is recorded on the

Accepted Answer

credit of the Capital account — Equity/capital increases on the credit side.

Question 7

Drawings taken by the owner are recorded on the

Accepted Answer

debit side — Drawings reduce capital, so they are debited.

Question 8

A business buys goods for cash. The correct double entry is

Accepted Answer

Debit Purchases; Credit Cash — The purchases expense rises (debit); cash (asset) falls (credit).

Question 9

Receiving cash from a debtor is recorded as

Accepted Answer

Debit Cash; Credit the debtor's account — Cash (asset) rises — debit; the debtor decreases — credit.

Question 10

The basic principle of the double-entry system is that

Accepted Answer

total debits always equal total credits — Every entry keeps total debits = total credits.