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Ace the Double Entry Bookkeeping Knowledge Test

Assess Your Ledger Recording and Reconciliation Skills

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting a quiz on Double Entry Bookkeeping Knowledge Test

Ready to sharpen your accounting chops? Joanna Weib invites budding bookkeepers and finance students to take this Double Entry Bookkeeping Knowledge Test and explore core bookkeeping principles. This quiz features 15 multiple-choice questions designed to help you master debit and credit entries and streamline reconciliation. Anyone aiming to improve bookkeeping accuracy or prepare for audits will find it both challenging and rewarding. Plus, every question is fully editable in our editor for personalized practice, and you can explore more quizzes or try the Data Entry Accuracy Training Quiz and the Entry-Level Business Analysis Practice Quiz to broaden your expertise.

When a business pays cash for office supplies, which account is debited?
Accounts Receivable
Accounts Payable
Cash
Office Supplies
The purchase of office supplies increases the Office Supplies asset account, which is recorded as a debit. The Cash account is credited to reflect the outflow of cash. This keeps the accounting equation balanced.
What is the basic accounting equation?
Assets = Liabilities + Equity
Assets = Equity - Liabilities
Liabilities = Assets + Equity
Assets + Liabilities = Equity
The fundamental accounting equation states that total assets equal the sum of liabilities and equity. This equation underpins double-entry bookkeeping by ensuring that every transaction keeps the equation in balance. It is the foundation for all financial recording.
Which side of a ledger account increases asset balances?
Equity side
Debit
Liability side
Credit
Asset accounts increase on the debit side and decrease on the credit side. This convention is central to double-entry bookkeeping. It ensures that increases in assets are recorded opposite increases in liabilities or equity.
Which statement best describes the double-entry bookkeeping principle?
Every transaction affects at least two accounts with equal debits and credits
Revenues and expenses are not recorded until year-end
Debits always exceed credits
Only cash transactions are recorded
Double-entry bookkeeping requires that each transaction impacts at least two accounts with equal debit and credit amounts. This rule maintains the integrity of the accounting equation. It prevents errors by enforcing balance across accounts.
On which side are revenues recorded in double-entry bookkeeping?
Liability side
Debit
Asset side
Credit
Revenues increase equity and are therefore recorded as credits in double-entry bookkeeping. Debits increase assets or expenses, while credits increase liabilities, equity, or revenues. Recording revenues on the credit side keeps the accounting equation in balance.
In recording depreciation expense, which account is credited?
Equipment
Accumulated Depreciation
Cash
Depreciation Expense
Depreciation Expense is debited to reflect the cost allocation, while Accumulated Depreciation is credited as a contra-asset. This credit entry reduces the book value of the related asset. It preserves the matching principle in financial reporting.
A trial balance does not balance. Which error could cause this discrepancy?
A transposition error in one amount
A correct journal entry was posted twice
A transaction was recorded in the wrong subsidiary ledger
One side of a journal entry was omitted
Omitting either the debit or credit side of a journal entry will create an imbalance on the trial balance. Both sides must be recorded for each transaction to keep total debits equal to total credits. Other errors may still leave the trial balance balanced.
An owner invests $10,000 cash into the business. What is the correct journal entry?
Debit Cash $10,000; Credit Accounts Payable $10,000
Debit Owner's Capital $10,000; Credit Cash $10,000
Debit Owner's Drawings $10,000; Credit Cash $10,000
Debit Cash $10,000; Credit Owner's Capital $10,000
When the owner invests cash, the Cash account increases and is debited, while Owner's Capital increases and is credited. This reflects the infusion of personal capital into the business. It upholds the accounting equation.
Which of the following is a nominal account?
Equipment
Sales Revenue
Accounts Payable
Cash
A nominal account tracks revenues, expenses, gains, and losses for a period and is closed at period end. Sales Revenue is a revenue account and therefore nominal. Cash and Equipment are real (permanent) accounts, and Accounts Payable is a liability.
During bank reconciliation, outstanding checks are:
Deducted from the book balance
Added to the book balance
Added to the bank statement balance
Deducted from the bank statement balance
Outstanding checks have been recorded in the company's books but not yet cleared by the bank, so they reduce the bank statement balance. Deducting them aligns the bank balance with the book balance. This is a key step in bank reconciliation.
An entry has its debit and credit amounts reversed in two different accounts. What is the effect on the trial balance?
The trial balance will be out of balance
Expenses will be overstated
Liabilities will be understated
The trial balance will still balance
If equal debit and credit amounts are swapped between two accounts, total debits still equal total credits, so the trial balance remains balanced. However, individual account balances will be incorrect. This is a classification error, not an arithmetic one.
What is the primary purpose of posting journal entries to the ledger?
To prepare the trial balance
To prepare financial statements directly
To record sales in special journals
To group transactions by account
Posting moves journal entry effects to individual ledger accounts so that each account's activity can be monitored. It organizes transactions by account and supports the preparation of trial balances and financial statements. This step ensures clarity in account balances.
What adjusting entry is needed at period end for prepaid insurance expired amount?
Debit Cash; Credit Insurance Expense
Debit Prepaid Insurance; Credit Insurance Expense
Debit Insurance Expense; Credit Cash
Debit Insurance Expense; Credit Prepaid Insurance
As prepaid insurance expires, the asset (Prepaid Insurance) is reduced and the related expense is recognized. Debiting Insurance Expense reflects cost usage, while crediting Prepaid Insurance reduces the asset balance. This follows accrual accounting principles.
A trial balance shows debits of $50,000 and credits of $49,500. What does the $500 difference indicate?
A debit of $500 was omitted
All entries are correct and complete
A credit of $500 was omitted
A transposition error of $5,000
When debits exceed credits by $500, it means a credit entry (or part of one) totaling $500 is missing. Checking for omitted entries on the credit side will locate the discrepancy. This is a common trial balance error.
Which account type is Accumulated Depreciation classified as?
Contra Asset
Equity
Expense
Liability
Accumulated Depreciation is a contra-asset account that offsets the related asset's book value. It carries a credit balance contrary to most asset accounts. This classification aids in showing both original cost and accumulated depreciation on the balance sheet.
A trial balance shows total debits greater than total credits by $2,000. Which type of account and balance is most likely missing?
A debit account with a $1,000 balance
A credit account with a $1,000 balance
A debit account with a $2,000 balance
A credit account with a $2,000 balance
If debits exceed credits by $2,000, then a missing credit of $2,000 is the likely cause. Identifying which credit account was omitted will correct the imbalance. This diagnostic step helps locate trial balance errors.
A company neglected to accrue salaries expense at period end. How does this affect the financial statements?
Assets overstated and liabilities overstated
Liabilities overstated and equity understated
Liabilities understated and equity overstated
Equity understated and expenses overstated
Failing to accrue salaries means expenses are too low and net income is too high, which overstates equity. At the same time, liabilities are understated because the owed salaries are not recorded. Accrual accounting requires recognition of incurred expenses.
What adjusting entry is required when unearned revenue is earned during the period?
Debit Revenue; Credit Unearned Revenue
Debit Cash; Credit Unearned Revenue
Debit Unearned Revenue; Credit Cash
Debit Unearned Revenue; Credit Revenue
When services are performed for which payment was received in advance, Unearned Revenue (a liability) is reduced by debiting it. Revenue is recognized by crediting the Revenue account. This entry applies the revenue recognition principle.
If the bank paid $100 interest not yet recorded in the books, what is the correct adjustment to the book balance?
Debit Cash $100; Credit Accounts Receivable $100
Debit Cash $100; Credit Interest Income $100
Debit Interest Income $100; Credit Cash $100
Debit Interest Expense $100; Credit Cash $100
Interest earned increases cash and is recorded as interest income. Debiting Cash reflects the inflow, and crediting Interest Income recognizes the revenue. Including this entry ensures the book balance matches the bank statement.
A $500 sales invoice was recorded as $50 in both Sales and Accounts Receivable. What is the effect?
Trial balance still balances; revenue understated by $450
Trial balance out of balance by $450; sales understated
Assets overstated; revenue correctly stated
Expenses understated; liabilities overstated
Recording both sides equally (even at the wrong amount) keeps the trial balance in balance. However, revenue and receivables are understated by $450. This type of error affects financial statement accuracy without disturbing debits and credits equality.
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Learning Outcomes

  1. Apply double-entry principles to maintain balanced accounts
  2. Identify correct debit and credit entries in transactions
  3. Analyse trial balances to spot accounting discrepancies
  4. Demonstrate accurate ledger posting with proper classification
  5. Evaluate financial statements for bookkeeping accuracy
  6. Master reconciliation techniques for precise account matching

Cheat Sheet

  1. Understand the Accounting Equation - Think of this like a seesaw balancing act: Assets always dance with Liabilities plus Equity to keep your books in perfect symmetry. It's the heart of double-entry bookkeeping, ensuring that every debit has its matching credit. Master this, and you'll spot errors with a single glance. Learn more on Wikipedia
  2. Master Debits and Credits - Debits and credits are the yin and yang of accounting magic. Remember DEAD CLIC to see which way the numbers flow: Debit for Expenses, Assets, Drawings; Credit for Liabilities, Income, Capital. Get comfy with this dance, and you'll record transactions like a pro. Learn more on Wikipedia
  3. Record Transactions in T-Accounts - Picture your accounts as giant T shapes - debits on the left leg, credits on the right. This visual trick transforms abstract numbers into a clear story of how transactions shift balances. It's like organizing your sock drawer by colors: neat and satisfying. Explore T-accounts at UMN Open Textbook
  4. Utilize Journals for Initial Entries - Think of journals as your transaction diary: every purchase, sale, or payment gets its moment in the spotlight before moving to the grand ledger stage. This keeps mistakes bottled up early, so your ledgers stay tidy and error-free. Journaling first means fewer headaches at month-end. Beginner Bookkeeping guide
  5. Post to the General Ledger - Once your transactions cozy up in journals, it's time to introduce them to the general ledger where all accounts mingle. This central hub collects every balance and sets the stage for financial statements. Think of it as the main character in your accounting story. QuickBooks guide
  6. Prepare a Trial Balance - Draft a trial balance to make sure debit totals high-five credit totals. Finding a mismatch here tells you something's out of whack before you even dream of writing financial statements. It's your error-detective tool in disguise. Check trial balances
  7. Adjust Entries for Accuracy - Adjusting entries tweak your books for things like depreciation or accrued expenses, so the numbers reflect reality. Skipping this is like forgetting to set your watch to daylight savings - your time (and reports) are off. Include these tweaks for picture-perfect statements. Adjusting entry tips
  8. Compile Financial Statements - With an adjusted trial balance in hand, you can build your income statement, balance sheet, and cash flow statement. These documents are like your business's report card and health check rolled into one. Present them clearly and you'll impress both bosses and bankers. OpenLearn on statements
  9. Reconcile Bank Statements - Matching your books against bank statements is like confirming a pizza delivery - every slice (or cent) needs to be accounted for. This routine keeps sneaky errors and unauthorized transactions from crashing your party. Do it regularly to keep your records legit. Bank reconciliation guide
  10. Stay Consistent with Accounting Periods - Picking and sticking to clear reporting periods (monthly, quarterly, yearly) lets you track trends like a pro detective. Consistency is the secret sauce for comparing results over time. This way, surprises are fun, not financial. Learn about periods
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