Double Entry Book Keeping - JSS1 Business studies Past Questions and Answers - page 2
What happens to an expense account if there's an overstatement?
No change is needed
Debit entry is made to decrease the balance
Credit entry is made to decrease the balance
Both debit and credit entries are made
In double entry bookkeeping, what ensures the balance of financial transactions?
Debit entries only
Credit entries only
Equal and opposite effects in at least two different accounts
No balance is required
What is the primary objective of double entry bookkeeping?
The primary objective of double entry bookkeeping is to ensure accuracy and completeness in recording financial transactions while maintaining the balance of the accounting equation.
Explain how an increase in assets is recorded in double entry bookkeeping.
An increase in assets is recorded by making a debit entry in the respective asset account. For example, when purchasing inventory for cash, the inventory account is debited.
How does double entry bookkeeping handle a decrease in liabilities?
A decrease in liabilities is recorded by making a debit entry in the respective liability account. For instance, when making a payment towards a loan, the loan payable account is debited.
What is the treatment of expenses in double entry bookkeeping?
Expenses are recorded by making a debit entry in the respective expense account when they are incurred. For example, when paying for utilities, the utilities expense account is debited.
How does double entry bookkeeping ensure the accuracy of financial records?
Double entry bookkeeping ensures accuracy by requiring every transaction to have equal and opposite effects in at least two different accounts, thereby maintaining the balance of the accounting equation.
Explain the concept of balancing in double entry bookkeeping.
Balancing in double entry bookkeeping refers to the equal and opposite effects of financial transactions in at least two different accounts, ensuring that the accounting equation remains balanced at all times.
What happens to an asset account when an asset is sold in double entry bookkeeping?
When an asset is sold, the asset account is credited to reflect the decrease in the asset's value or removal from the company's possession.
How are liabilities treated when they are incurred in double entry bookkeeping?
When liabilities are incurred, they are recorded by making a credit entry in the respective liability account. For example, when borrowing money from a bank, the loan payable account is credited.