Double Entry Bookkeeping Revision Questions

Double Entry Bookkeeping Revision Questions

1)  Which one of the following categories of account is debited when it is increased?

1. Revenue
2. Purchases
3. Source of Funds
4. Liability

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2)  Which one of the following categories of account is credited when it is increased?

1. Revenue
2. Purchases
3. Asset
4. Expenses

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3)  Which one of the following categories of account is credited when it is decreased?

1. Liabilities
2. Revenue
3. Source of funds
4. Expenses

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4)  When an account in the asset category is decreased it is credited?

1. TRUE
2. FALSE

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5)  Which one of the following categories of account is debited when it is decreased?

1. Liabilities
2. Asset
3. Purchases
4. Expenses

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6)  You buy a computer and pay immediately by cheque  Which one of the following pairs of accounts is affected?

1. Raw Materials and Bank
2. Loan and Equipment
3. Sales and Equipment
4. Equipment and Bank

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7)  You borrow £5000 and put it in your current account.  Which one of the following pairs of accounts is affected?

1. Rent and Bank
2. Loan and Bank
3. Loan and VAT
4. Trade Creditors and Bank

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8)  You make a cash sale for £200.  Which one of the following pairs of accounts is affected?

1. Rent and Bank
2. Purchases and Bank
3. Bank and Sales
4. Sales and Trade Debtors

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9)  The Accounting Equation can be expressed as Assets minus Liabilities equals Source of Funds.

1. TRUE
2. FALSE

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10)  In the double-entry bookkeeping system, every transaction affects two accounts.  Which one of the following statements is true?

1. If one of the two accounts is in one of the PEA categories, the other must be in one of the RLS categories
2. If one of the accounts decreases in value, the other must increase
3. Both accounts must increase in value
4. None of the above

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Double Entry Bookkeeping Revision Answers

1)  Option (b) is correct.  Follow the PEARLS rule.  Purchases accounts are debited when they increase in value.

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2)  Option (a) is correct.  Follow the PEARLS rule.  Revenue accounts are credited when they increase in value.

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3)  Option (d) is correct.  Follow the PEARLS rule.  Expenses accounts are credited when they decrease in value.

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4)  Option (a) is correct.  This is TRUE.  According to the PEARLS rule, these accounts are credited when they decrease in value.

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5)  Option (a) is correct.  Follow the PEARLS rule.  Liability accounts are debited when they decrease in value.

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6)  Option (d) is correct.  The Bank account must be involved since you paid by cheque.  A computer purchase would not be recorded under raw materials.

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7)  Option (b) is correct.  The Bank account must be involved since you put money into the bank.  You borrowed money, so the Loan account is involved.

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8)  Option (c) is correct.  The Bank account must be involved since you put money into the bank.  You made a sale, so the Sales account is involved.

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9)  Option (a) is correct.  This is True.  This is one way of stating the equation.  Another is Assets = Liabilities + Source of Funds.  What the business owns, the business owes.

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10)  Option (d) is correct.  Option (a) is not correct, both accounts can be in the PEA category.  For example, the payment of an expense involves an Expense account and an Asset account (e.g. the Bank account).  Option (b) is not correct, both accounts can increase in value.  For example a loan would increase a Liability account and increase an Asset account (e.g. a Bank account).

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