ACCA AK Financial Accounting (FA) Double Entry

Question 1

A business purchases office furniture for £3,000 on credit. What is the correct double entry?

Accepted Answer

Debit Furniture £3,000, Credit Trade Payables £3,000

Answer

When an asset is acquired on credit, the asset account (Furniture) is debited to reflect the increase, and Trade Payables is credited to reflect the liability owed to the supplier.

Question 2

Which of the following correctly describes the accounting equation?

Accepted Answer

Assets = Equity + Liabilities

Answer

The fundamental accounting equation is Assets = Equity + Liabilities (or equivalently, Assets − Liabilities = Equity). This equation must always balance after every transaction is recorded.

Question 3

A customer pays £500 to settle an outstanding invoice. What is the double entry in the supplier's books?

Accepted Answer

Debit Cash £500, Credit Trade Receivables £500

Answer

When a customer settles an outstanding debt, Cash (asset) is debited to reflect the money received, and Trade Receivables (asset) is credited to remove the amount owed by the customer.

Question 4

A business pays rent of £2,000 for the month. What is the double entry?

Accepted Answer

Debit Rent Expense £2,000, Credit Cash £2,000

Answer

Paying rent is an expense. The expense account (Rent) is debited to reflect the cost incurred, and Cash is credited to reflect the outflow of money from the business.

Question 5

What is the purpose of a trial balance?

Accepted Answer

To verify that total debits equal total credits in the ledger

Answer

A trial balance lists all ledger account balances to check that total debits equal total credits. It is an arithmetic check on the double entry system, though it will not detect all types of errors (e.g., errors of commission, compensating errors).

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Financial Accounting (FA) Double Entry