What is the fundamental principle of the double-entry system?
a) Every transaction is recorded twice in the same account
b) Every transaction affects only one account
c) Every debit has a corresponding credit
d) Transactions are recorded only when cash is received
Which of the following is the correct accounting equation?
a) Assets = Liabilities – Capital
b) Assets + Liabilities = Capital
c) Assets = Liabilities + Capital
d) Liabilities = Assets + Capital
What is debited when a business purchases equipment for cash?
a) Cash
b) Equipment
c) Revenue
d) Liability
Which of the following accounts increases with a credit entry?
a) Expenses
b) Assets
c) Revenue
d) Drawings
When a business receives cash from a debtor, which account is debited?
a) Cash
b) Accounts Payable
c) Revenue
d) Capital
What happens when a company pays rent in cash?
a) Debit Rent Expense, Credit Cash
b) Debit Cash, Credit Rent Expense
c) Debit Rent Expense, Credit Capital
d) Debit Capital, Credit Rent Expense
Which of the following transactions increases assets and increases liabilities?
a) Purchase of goods for cash
b) Taking a bank loan
c) Payment of rent
d) Sale of goods for cash
Which account is credited when a business takes a loan from a bank?
a) Bank Loan
b) Cash
c) Capital
d) Revenue
Which of the following best describes a ledger?
a) A summary of all financial statements
b) A book that contains all accounts
c) A document used to record cash transactions
d) A report that shows profit and loss
What is the correct journal entry for purchasing raw materials on credit?
a) Debit Cash, Credit Raw Materials
b) Debit Purchases, Credit Accounts Payable
c) Debit Accounts Payable, Credit Purchases
d) Debit Raw Materials, Credit Cash
If a company issues shares for cash, how does it affect the accounting equation?
a) Increases assets and increases capital
b) Decreases assets and decreases liabilities
c) Increases liabilities and decreases assets
d) No effect
Which account is debited when goods are purchased on credit?
a) Accounts Payable
b) Purchases
c) Cash
d) Sales
Which of the following transactions affects both assets and capital?
a) Purchase of inventory on credit
b) Cash withdrawal by owner
c) Issuance of shares
d) Bank loan taken
Which entry is made when a customer pays an outstanding invoice?
a) Debit Accounts Receivable, Credit Cash
b) Debit Cash, Credit Accounts Receivable
c) Debit Sales, Credit Cash
d) Debit Revenue, Credit Accounts Receivable
Which financial statement is directly affected by double-entry transactions?
a) Balance Sheet
b) Budget Report
c) Bank Statement
d) Marketing Report
Which of the following accounts increases with a debit?
a) Sales
b) Capital
c) Expenses
d) Liabilities
What happens when an owner withdraws cash for personal use?
a) Debit Drawings, Credit Cash
b) Debit Cash, Credit Drawings
c) Debit Capital, Credit Cash
d) Debit Revenue, Credit Drawings
Which of the following transactions affects both assets and liabilities?
a) Purchase of equipment on credit
b) Payment of rent
c) Withdrawal of cash by the owner
d) Sale of goods for cash
If a company pays off a loan, what is the correct journal entry?
a) Debit Loan Payable, Credit Cash
b) Debit Cash, Credit Loan Payable
c) Debit Loan Payable, Credit Revenue
d) Debit Loan Payable, Credit Capital
Which statement is true about double-entry bookkeeping?
a) Only expenses are recorded twice
b) It ensures errors never occur
c) Each transaction has equal debit and credit entries
d) Revenue is recorded but expenses are ignored
What happens when inventory is purchased for cash?
a) Debit Cash, Credit Purchases
b) Debit Purchases, Credit Cash
c) Debit Sales, Credit Cash
d) Debit Revenue, Credit Purchases
Which of the following accounts decreases with a credit entry?
a) Revenue
b) Assets
c) Liabilities
d) Capital
Which of the following is an example of a contra entry?
a) Withdrawal of cash from bank
b) Purchase of goods on credit
c) Payment of salaries
d) Sale of assets
