Double Entry Bookkeeping Flashcards

A company purchases office supplies worth $500 on account. Which accounts are affected?

Answer: Debit Office Supplies, Credit Accounts Payable

Purchasing supplies on account increases an asset (Office Supplies debit) and increases a liability (Accounts Payable credit).

What is the accounting equation that underpins double entry bookkeeping?

Answer: Assets = Liabilities + Owner's Equity

The fundamental accounting equation is Assets = Liabilities + Owner's Equity, and every transaction must keep this equation in balance.

When a customer pays $1,200 in advance for services to be rendered next month, the bookkeeper should:

Answer: Debit Cash, Credit Unearned Revenue

Cash received before services are performed creates a liability (Unearned Revenue) because the obligation to deliver the service still exists.

Which entry correctly records the payment of a $2,000 liability that was previously recorded?

Answer: Debit Accounts Payable $2,000, Credit Cash $2,000

Paying off a recorded liability decreases the liability (debit Accounts Payable) and decreases cash (credit Cash).

A firm earns $3,500 in consulting fees and immediately collects cash. The correct entry is:

Answer: Debit Cash $3,500, Credit Consulting Revenue $3,500

Collecting cash for services rendered increases the asset Cash (debit) and increases revenue (credit).

The left side of a T-account is always the:

Answer: Debit side

By convention, the left side of any T-account is always the debit side, regardless of the account type.

If total debits in a trial balance equal $85,000, what must total credits equal?

Answer: $85,000

The trial balance is in balance only when total debits equal total credits, so both sides must equal $85,000.