Chapter 3- Double Entry Bookkeeping

Question 1

Describe the basic unit of the double entry system

Answer 1

• ledger or T account
• divided into two sides
• left hand side is referred to as the debit side
• right hand side is referred to as the credit side

Question 2

What does a ledger or T account do?

Answer 2

• groups together transactions of the same type

Question 3

Describe a debit

Answer 3

• a debit transaction occurs when there is an increase in an asset or an expense or an increase in drawings made by the proprietor

Question 4

Describe a credit

Answer 4

• arises when there is an increase in liabilities, income or capital

Question 5

What can debits represent?

Answer 5

• an increase in an asset
• an increase in an expense
• an increase in a drawing
• a decrease in a liability
• a decrease in income

Question 6

What can a credit represent?

Answer 6

• an increase in a liability
• an increase in income
• an increase in capital
• a decrease in an asset
• a decrease in an expense