The Double Entry System of Book-Keeping (Copy)
Topic 2.1: The Double Entry System of Book-keeping – Quiz
O Level and IGCSE Accounting
1. What is the basic principle of double entry book-keeping?
A. One entry per transaction
B. Two entries in the same account
C. Every transaction affects two accounts
D. Entries are only made in the cash account
2. In double entry, what does a debit entry usually represent?
A. A decrease in assets
B. A decrease in expenses
C. An increase in liabilities
D. An increase in assets
3. What type of account is debited when goods are purchased for cash?
A. Purchases Account
B. Sales Account
C. Capital Account
D. Drawings Account
4. A business receives cash from a debtor. Which accounts are affected?
A. Cash and Sales
B. Debtor and Purchases
C. Cash and Debtor
D. Cash and Capital
5. Which of the following is a personal account?
A. Rent Expense
B. Wages
C. Equipment
D. Mr Ali
6. Which of the following accounts would appear in the nominal (general) ledger?
A. Sales Account
B. Customer Account
C. Supplier Account
D. Accounts Receivable
7. The ledger is divided into how many main sections?
A. 1
B. 2
C. 3
D. 4
8. Which ledger contains accounts of customers to whom goods have been sold on credit?
A. Nominal Ledger
B. Cash Ledger
C. Sales Ledger
D. Purchases Ledger
9. Which ledger contains accounts of suppliers from whom goods have been bought on credit?
A. Nominal Ledger
B. Cash Ledger
C. Purchases Ledger
D. Sales Ledger
10. If goods are sold on credit to Mr. Khan, what is the correct entry?
A. Debit Sales, Credit Mr. Khan
B. Debit Mr. Khan, Credit Sales
C. Debit Cash, Credit Mr. Khan
D. Debit Mr. Khan, Credit Cash
11. When the business pays rent by cheque, the correct entry is:
A. Debit Bank, Credit Rent
B. Debit Rent, Credit Bank
C. Debit Rent, Credit Capital
D. Debit Bank, Credit Drawings
12. What does balancing a ledger account involve?
A. Adding all debits
B. Adding all credits
C. Finding the difference between debit and credit sides
D. Posting new entries
13. What is the purpose of the trial balance?
A. To check the bank balance
B. To prepare financial statements
C. To list all cash transactions
D. To ensure that total debits equal total credits
14. Which of the following is recorded in the general ledger?
A. Credit sales to Mr. Ahmed
B. Purchase of machinery
C. Receipt from customer
D. Goods returned by customer
15. Capital introduced by owner is recorded as:
A. Debit Bank, Credit Capital
B. Debit Capital, Credit Bank
C. Debit Sales, Credit Capital
D. Debit Drawings, Credit Bank
16. If the business owner withdraws cash for personal use, the entry is:
A. Debit Drawings, Credit Bank
B. Debit Capital, Credit Bank
C. Debit Bank, Credit Drawings
D. Debit Cash, Credit Drawings
17. A credit balance in a ledger account usually means:
A. An asset
B. An expense
C. A liability or income
D. A loss
18. Which account is debited when the business purchases machinery for cash?
A. Purchases
B. Capital
C. Machinery
D. Bank
19. The sales ledger contains which type of balances?
A. Credit balances only
B. Debit balances only
C. Both debit and credit
D. Zero balances only
20. What is the function of the purchases ledger?
A. Records cash sales
B. Records credit sales
C. Records credit purchases
D. Records income and expenses
21. What is the correct double entry for cash sales?
A. Debit Sales, Credit Bank
B. Debit Cash, Credit Sales
C. Debit Sales, Credit Debtor
D. Debit Purchases, Credit Cash
22. Which account increases on the credit side?
A. Rent Expense
B. Motor Vehicle
C. Capital
D. Drawings
23. What is the double entry when a debtor pays by cheque?
A. Debit Debtor, Credit Bank
B. Debit Bank, Credit Debtor
C. Debit Sales, Credit Debtor
D. Debit Debtor, Credit Sales
24. A debit balance in the wages account represents:
A. An income
B. An asset
C. A liability
D. An expense
25. What is meant by the term “posting”?
A. Copying entries to trial balance
B. Recording entries in books of original entry
C. Transferring entries to ledger accounts
D. Balancing the cash book
26. Which account is credited when the business pays for electricity by cash?
A. Electricity
B. Bank
C. Drawings
D. Sales
27. Why do businesses divide their ledger into sections?
A. To increase number of transactions
B. To reduce trial balance entries
C. To organise accounts by function
D. To make profit calculation easier
28. A credit sale to Mr. Saleem of $300 is recorded as:
A. Debit Mr. Saleem, Credit Sales
B. Debit Sales, Credit Mr. Saleem
C. Debit Sales, Credit Cash
D. Debit Mr. Saleem, Credit Cash
29. The main rule of double entry book-keeping is:
A. Debit the giver, credit the receiver
B. Debit all expenses, credit all income
C. Debit what comes in, credit what goes out
D. Every debit must have a corresponding credit
30. Which of the following is true of the general (nominal) ledger?
A. It contains personal accounts only
B. It contains impersonal accounts only
C. It contains cash accounts only
D. It contains customer accounts only
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
Answer key and explanations
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course
1. Correct Answer: C
Explanation: The double entry system states that every transaction affects two accounts—one debit and one credit.
2. Correct Answer: D
Explanation: A debit entry generally increases assets or expenses.
3. Correct Answer: A
Explanation: When goods are purchased for cash, the Purchases Account is debited (expense), and Cash or Bank is credited.
4. Correct Answer: C
Explanation: Receiving cash from a debtor reduces the Debtor’s Account (credit) and increases the Cash Account (debit).
5. Correct Answer: D
Explanation: Mr Ali is a personal account (name of a person or business).
6. Correct Answer: A
Explanation: Sales Account is a nominal account, hence placed in the nominal ledger.
7. Correct Answer: C
Explanation: The three sections of the ledger are: Sales Ledger, Purchases Ledger, and Nominal (General) Ledger.
8. Correct Answer: C
Explanation: The Sales Ledger records all credit customers (debtors).
9. Correct Answer: C
Explanation: The Purchases Ledger records accounts of credit suppliers (creditors).
10. Correct Answer: B
Explanation: On credit sale, debit the customer (Mr. Khan), credit Sales.
11. Correct Answer: B
Explanation: Rent is an expense → Debit; Bank (asset) decreases → Credit.
12. Correct Answer: C
Explanation: Balancing means finding the difference between debit and credit to bring down a closing balance.
13. Correct Answer: D
Explanation: The trial balance ensures that for all entries, total debits equal total credits.
14. Correct Answer: B
Explanation: Purchase of machinery is recorded in the general ledger (asset account).
15. Correct Answer: A
Explanation: Bank increases (debit), Capital increases (credit).
16. Correct Answer: A
Explanation: Personal use → Drawings (debit), Bank (credit) since cash leaves the business.
17. Correct Answer: C
Explanation: Credit balances often indicate liabilities or incomes.
18. Correct Answer: C
Explanation: Machinery is an asset → Debit; Cash/Bank is credited.
19. Correct Answer: B
Explanation: Sales ledger contains debit balances because customers owe money.
20. Correct Answer: C
Explanation: Purchases ledger records supplier accounts (credit purchases).
21. Correct Answer: B
Explanation: Cash increases → Debit; Sales is income → Credit.
22. Correct Answer: C
Explanation: Capital increases on the credit side (owner’s investment).
23. Correct Answer: B
Explanation: Bank increases (debit), Debtor’s balance decreases (credit).
24. Correct Answer: D
Explanation: Wages are an expense and are always debited.
25. Correct Answer: C
Explanation: Posting means transferring entries from books of original entry to ledger accounts.
26. Correct Answer: B
Explanation: Electricity is debited (expense), and Cash/Bank is credited.
27. Correct Answer: C
Explanation: The division helps organise data and improve efficiency.
28. Correct Answer: A
Explanation: On credit sale, debit the customer (Mr. Saleem), credit Sales.
29. Correct Answer: D
Explanation: Fundamental principle of double entry: each debit has an equal credit.
30. Correct Answer: B
Explanation: The general (nominal) ledger holds impersonal accounts—assets, liabilities, expenses, and incomes.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course