MCQs on Double Entry Booking in Accountancy
1.
Which
among the below actually defines double entry bookkeeping?
1:- Recording financial transactions twice
2:-
Recording financial transactions in two separate accounts
3:- Recording financial transactions in two different
currencies
4:- Recording financial transactions in two different time
periods
Explanation: Double
entry bookkeeping is a system of recording financial transactions where every
transaction is recorded in at least two separate accounts, which is what makes
it "double entry." One account is debited (recorded as an increase)
while another is credited (recorded as a decrease) by the same amount.
2.
Tell
me which is true about double entry bookkeeping?
1:- It is a method used only by small businesses
2:- It is a system that doesn't require balancing
3:-
It is a system that prevents errors and fraud
4:- It is a system that doesn't allow for adjustments
Explanation: Double
entry bookkeeping is a system that prevents errors and fraud because every
transaction is recorded twice in separate accounts, ensuring that the total
debits always equal the total credits. This makes it easier to detect and
correct errors or fraudulent activities.
3.
Which
among is an example of a the transaction that would require the two separate
entries in double entry book-keeping?
1:- Paying rent for the office space
2:- Purchasing a new computer for the office
3:-
Selling products to a customer for cash
4:- Receiving a loan from a bank
Explanation: Selling
products to a customer for cash would require two separate entries in double
entry bookkeeping. One account would be debited for the amount of cash
received, while another account would be credited for the value of the products
sold.
4.
Which
is true about Balance sheet?
1:- The balance sheet is a summary of all transactions for a
given period of time
2:-
The balance sheet shows the company's financial position at a specific point in
time
3:- The balance sheet only includes information about the
company's assets
4:- The balance sheet only includes information about the
company's liabilities
Explanation: The
balance sheet in double entry bookkeeping shows the company's financial
position at a specific point in time, typically at the end of a reporting
period. It includes information about the company's assets, liabilities, and
equity.
5.
What
is a journal?
1:-
A book of accounts that records transactions in chronological order
2. A summary of all transactions posted in the ledger
3. A book of accounts that records transactions in alphabetical
order
4:- A book of accounts that records only cash transactions
Answer: 1:- A
journal is a book of accounts that records transactions in chronological order,
which includes details such as the date, accounts involved, and amounts debited
or credited. It is used to record transactions before they are posted to the
ledger.
6.
What
is a ledger?
1:- A book of accounts that records transactions in
chronological order
2:-
A summary of all transactions posted in the journal
3:- A book of accounts that records transactions in
alphabetical order
4:- A book of accounts that records only credit transactions
Answer: 2:- A
ledger is a summary of all transactions posted in the journal, which includes
individual accounts for each asset, liability, revenue, and expense. It is used
to keep track of the balance of each account and to prepare financial statements.
7. The journal entry for the purchase of
equipment on credit is what?
1:- Debit Equipment, Credit Cash
2:- Debit Accounts Payable, Credit Equipment
3:-
Debit Equipment, Credit Accounts Payable
4:- Debit Cash, Credit Accounts Payable
Answer: 3:- The
correct journal entry for the purchase of equipment on credit is Debit
Equipment, Credit Accounts Payable. This entry records the increase in
equipment and the liability to pay for it in the future.
8.
Which
among the benefit of using a journal & ledger system?
1:- Provides a summary of all transactions
2:- Ensures accurate recording of transactions
3:- Allows easy identification of errors
4:-
All of the above
Answer: 4:- Using
a journal and ledger system provides a summary of all transactions, ensures
accurate recording of transactions, and allows easy identification of errors.
It also helps in the preparation of financial statements and provides a
historical record of business transactions.
9.
Which
among the below journal entries would be made for the sale made on credit?
1:- Debit Cash, Credit Sales
2:- Debit Accounts Payable, Credit Sales
3:-
Debit Accounts Receivable, Credit Sales
4:- Debit Sales, Credit Accounts Receivable
Answer: 3:- The
correct journal entry for a sale made on credit is Debit Accounts Receivable,
Credit Sales. This entry records the increase in accounts receivable and the
revenue earned from the sale.
10.
For
payment of rent in a cash, which of the following journal entry is correct?
1:-
Debit Rent Expense, Credit Cash
2:- Debit Cash, Credit Rent Expense
3:- Debit Accounts Payable, Credit Cash
4:- Debit Cash, Credit Accounts Payable
Answer: 1:- The
correct journal entry for the payment of rent in cash is Debit Rent Expense,
Credit Cash. This entry records the expense incurred for rent and the decrease
in cash.
11.
For
the purchase of supplies on credit , which among the below is correct journal
entry?
1:- Debit Supplies, Credit Cash
2:- Debit Accounts Payable, Credit Supplies
3:-
Debit Supplies Expense, Credit Accounts Payable
4:- Debit Accounts Receivable, Credit Supplies
Answer: 3:- The
correct journal entry for the purchase of supplies on credit is Debit Accounts
Payable, Credit Supplies. This entry records the increase in supplies and the
liability to pay for it in the future.
12.
Which
among the below is the correct format for the journal entry?
1:-
Debit Account, Credit Account, Amount
2:- Credit Account, Debit Account, Amount
3:- Account, Debit, Credit, Amount
4:- Account, Credit, Debit, Amount
Answer: 1:- The
correct format for a journal entry is Debit Account, Credit Account, Amount.
This format ensures that the total debits equal the total credits, which is
essential for accurate accounting.
13. The correct debit and credit entry in
case when a company receives cash from a customer, is?
1:-
Debit Cash, Credit Accounts Receivable
2:- Debit Accounts Receivable, Credit Cash
3:- Debit Cash, Credit Sales
4:- Debit Sales, Credit Cash
Answer: 1:- The
correct journal entry for receiving cash from a customer is Debit Cash, Credit
Accounts Receivable. This entry records the increase in cash and the decrease
in accounts receivable.
14.
The
company paid expense in cash, which account is debited and credited?
1:- Debit Cash, Credit Expense
2:-
Debit Expense, Credit Cash
3:- Debit Accounts Payable, Credit Cash
4:- Debit Cash, Credit Accounts Payable
Answer: 2:- The
correct journal entry for paying for an expense in cash is Debit Expense,
Credit Cash. This entry records the decrease in cash and the expense incurred.
15.
Company
borrowed money from a bank, which account is debited and which one is credited?
1:-
Debit Bank, Credit Loan Payable
2:- Debit Loan Payable, Credit Bank
3:- Debit Bank, Credit Interest Expense
4:- Debit Interest Expense, Credit Bank
Answer: 1:- The
correct journal entry for borrowing money from a bank is Debit Bank, Credit
Loan Payable. This entry records the increase in cash and the liability to
repay the loan.
16.
On
selling inventory on credit, the accounts which are debited and credited are?
1:-
Debit Accounts Receivable, Credit Sales
2:- Debit Sales, Credit Inventory
3:- Debit Inventory, Credit Accounts Receivable
4:- Debit Inventory, Credit Sales
Answer: The
Accounts Receivable account is debited to record the amount owed to the company
by the buyer, and the Sales account is credited to record the revenue earned
from the sale. None of the options provided in the question match this correct
accounting entry.
17.
On
paying dividend to shareholders, the accounts which are debited and credited
are?
1:- Debit Dividends, Credit Cash
2:- Debit Cash, Credit Dividends
3:- Debit Retained Earnings, Credit cash
4:- Debit Dividends Payable, Credit Cash
Answer: This is
because the payment of dividends reduces the company's Retained Earnings, and
the cash paid out to the shareholders is recorded in the Cash account.