Double entry, debit and credit rules, ledger accounts, balancing accounts

1. A trader introduced $7000 cash into the business. Which double entry is correct?

A Debit capital, credit bank
B Debit bank, credit capital
C Debit drawings, credit bank
D Debit bank, credit drawings

2. A ledger account has debit entries totaling $18 400 and credit entries totaling $13 900 before balancing. Which statement is correct?

A The balance c/d is $4500 on the debit side and balance b/d is $4500 on the credit side.
B The balance c/d is $32 300 on the credit side and balance b/d is $32 300 on the debit side.
C The balance c/d is $4500 on the credit side and balance b/d is $4500 on the debit side.
D The balance c/d is $4500 on both sides.

3. Equipment is bought on credit from Zaman Traders. Which entry records this?

A Debit purchases, credit Zaman Traders
B Debit equipment, credit Zaman Traders
C Debit Zaman Traders, credit equipment
D Debit Zaman Traders, credit purchases

4. Cash sales of $700 were incorrectly recorded as debit sales and credit cash. What correction is required?

A Debit cash $700, credit sales $700
B Debit sales $700, credit cash $700
C Debit cash $1400, credit sales $1400
D Debit sales $1400, credit cash $1400

5. A credit customer returns goods worth $250. Which double entry is correct?

A Debit customer, credit sales returns
B Debit sales returns, credit customer
C Debit purchases returns, credit customer
D Debit customer, credit purchases returns

6. A supplier allows a cash discount of $60. Which double entry is correct in the buyer’s books?

A Debit discount allowed, credit supplier
B Debit supplier, credit discount received
C Debit discount received, credit supplier
D Debit supplier, credit discount allowed

7. Which item would normally have a credit balance in the ledger?

A Machinery
B Drawings
C Purchases
D Trade payable

8. When a non-current asset account is balanced at the end of the year, where is the balance c/d entered?

A Debit side, because assets have debit balances
B Credit side, because the balance is carried down to complete the account
C Credit side, because assets are liabilities
D Debit side, because the asset has been sold

9. The owner withdraws cash from the business for personal use. Which entry is correct?

A Debit cash, credit drawings
B Debit drawings, credit cash
C Debit capital, credit drawings
D Debit cash, credit capital

10. A credit customer owing $800 pays by cheque after deducting $40 cash discount. Which double entry records the receipt?

A Debit bank $760, debit discount allowed $40, credit customer $800
B Debit bank $760, debit discount received $40, credit customer $800
C Debit customer $800, credit bank $760, credit discount allowed $40
D Debit bank $800, credit customer $760, credit discount allowed $40

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A customer’s account contains the following entries.

Debit side: sales $5000
Credit side: bank $3700, sales returns $600, discount allowed $100

What is the closing balance?

A $600 debit
B $600 credit
C $1600 debit
D $1600 credit

12. Which entry records goods bought on credit for resale?

A Debit supplier, credit purchases
B Debit purchases, credit supplier
C Debit inventory, credit capital
D Debit purchases returns, credit supplier

13. Which item is entered on the debit side of a trade payable’s account?

A Credit purchases
B Payment to supplier
C Balance b/d when amount is owed to supplier
D Invoice received from supplier

14. Which account is credited when goods are bought on credit for resale?

A Purchases account
B Supplier’s account
C Sales account
D Bank account

15. A business returns goods worth $180 to a supplier. Which entry is correct?

A Debit supplier, credit purchases returns
B Debit purchases returns, credit supplier
C Debit sales returns, credit supplier
D Debit supplier, credit sales returns

16. A ledger account has balance c/d on the debit side. What does this mean?

A The account has a debit balance carried down.
B The account has a credit balance carried down.
C The account must be an asset account.
D The account cannot be balanced.

17. A wages account shows wages paid by cheque $8200 on the debit side and accrued wages brought down $500 on the debit side. At the year-end accrued wages carried down are $300. What amount is transferred to the income statement?

A $8000
B $8400
C $8700
D $9000

18. The owner pays a business loan of $2000 using private money. Which entry is correct in the business books?

A Debit capital, credit loan
B Debit loan, credit capital
C Debit drawings, credit loan
D Debit loan, credit drawings

19. The business pays the owner’s personal rent by cheque. Which entry is correct?

A Debit rent expense, credit bank
B Debit drawings, credit bank
C Debit capital, credit rent expense
D Debit bank, credit drawings

20. Which transaction is recorded by debiting an expense account and crediting bank?

A The business paid a business expense by cheque.
B The owner introduced cash into the business.
C The business received cash from a customer.
D The owner withdrew goods for private use.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A supplier’s account shows the following.

Credit side: balance b/d $2500, purchases $5600
Debit side: bank $4000, purchases returns $300, discount received $100

What is the balance carried down?

A $3700 debit side
B $3700 credit side
C $8100 debit side
D $4400 credit side

22. A customer’s account shows the following.

Debit side: balance b/d $1200, sales $2800
Credit side: bank $2500, sales returns $300, discount allowed $100

What is the closing balance?

A $1100 debit balance
B $1100 credit balance
C $2900 debit balance
D $4000 credit balance

23. The cash account has an opening debit balance. What does this mean?

A The business has cash in hand at the start of the period.
B The business has a cash overdraft at the start of the period.
C The owner owes cash to the business.
D The business owes cash to a supplier.

24. The owner introduces a personal motor vehicle into the business. Which entry is correct?

A Debit capital, credit motor vehicles
B Debit motor vehicles, credit capital
C Debit drawings, credit motor vehicles
D Debit motor vehicles, credit drawings

25. A debt of $450 is written off as irrecoverable. Which double entry is correct?

A Debit trade receivable, credit irrecoverable debts
B Debit irrecoverable debts, credit trade receivable
C Debit cash, credit trade receivable
D Debit trade receivable, credit sales returns

26. The owner takes goods costing $400 for private use. Which entry is correct?

A Debit drawings, credit purchases
B Debit purchases, credit drawings
C Debit sales, credit drawings
D Debit drawings, credit sales

27. A cash discount is received from a supplier. Which entry is correct?

A Debit discount received, credit supplier
B Debit supplier, credit discount received
C Debit discount allowed, credit supplier
D Debit supplier, credit discount allowed

28. Which entry decreases both an asset and capital?

A Debit expense, credit bank
B Debit bank, credit capital
C Debit supplier, credit bank
D Debit bank, credit sales

29. Which entry decreases a liability and increases capital?

A Debit supplier, credit discount received
B Debit discount allowed, credit customer
C Debit purchases, credit supplier
D Debit drawings, credit bank

30. When balancing an asset account, where should the balance c/d and next period balance b/d appear?

A Balance c/d debit side; balance b/d credit side
B Balance c/d credit side; balance b/d debit side
C Both on debit side
D Both on credit side

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A motor vehicles account shows:

Debit side: balance b/d $15 000, bank $6000
Credit side: disposal $4000

What is the balance c/d?

A $17 000 on the debit side
B $17 000 on the credit side
C $25 000 on the debit side
D $25 000 on the credit side

32. A cheque received from a customer for $1000 is later dishonoured by the bank. Which entry records the dishonoured cheque?

A Debit bank, credit customer
B Debit customer, credit bank
C Debit dishonoured cheques, credit customer
D Debit bank charges, credit bank

33. Bank charges of $85 appear on the bank statement but have not yet been recorded in the books. Which entry is required?

A Debit bank, credit bank charges
B Debit bank charges, credit bank
C Debit drawings, credit bank
D Debit bank charges, credit trade payable

34. A bank account in the ledger has an opening credit balance. What does this indicate?

A Cash in hand
B Bank overdraft
C Prepaid bank charges
D Bank loan fully repaid

35. Which statement about the sales returns account is correct?

A It normally has a credit balance because it increases sales.
B It normally has a debit balance because it reduces sales.
C It is debited when goods are returned to suppliers.
D It is credited when goods are sold for cash.

36. Which statement about the purchases returns account is correct?

A It normally has a debit balance because it reduces purchases.
B It normally has a credit balance because it reduces purchases.
C It is debited when customers return goods.
D It is credited when goods are bought on credit.

37. A customer returns goods previously sold on credit. Which two ledger accounts are affected?

A Sales returns and customer
B Purchases returns and supplier
C Sales and bank
D Purchases and cash

38. A trader paid a supplier $940 by cheque in full settlement of a debt of $1000. The supplier’s account was debited with only $940. What additional entry is needed?

A Debit discount received $60, credit supplier $60
B Debit supplier $60, credit discount received $60
C Debit discount allowed $60, credit supplier $60
D Debit supplier $60, credit discount allowed $60

39. The owner lends $5000 to the business and records it as a loan, not capital. Which entry is correct?

A Debit bank, credit capital
B Debit loan from owner, credit bank
C Debit bank, credit loan from owner
D Debit drawings, credit loan from owner

40. Cash is paid from the till into the business bank account. Which entry is correct?

A Debit cash, credit bank
B Debit bank, credit cash
C Debit drawings, credit bank
D Debit bank, credit capital

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. Which item is posted to the credit side of a customer’s personal account?

A Goods sold to the customer on credit
B Cash received from the customer
C Opening debit balance
D Interest charged to the customer

42. Which item is posted to the credit side of a supplier’s personal account?

A Payment made to supplier
B Goods returned to supplier
C Discount received from supplier
D Goods bought on credit from supplier

43. Office equipment is bought by cheque. Which entry is correct?

A Debit office equipment, credit bank
B Debit purchases, credit bank
C Debit bank, credit office equipment
D Debit office expenses, credit capital

44. Which item is not a ledger account?

A Sales account
B Purchases returns account
C Statement of account
D Drawings account

45. Rent income of $900 is received in cash for the current period. Which entry is correct?

A Debit rent received, credit cash
B Debit cash, credit rent received
C Debit cash, credit rent payable
D Debit rent expense, credit cash

46. A rent payable account has a credit balance brought down at the start of the year. What does this mean?

A Rent had been paid in advance at the start of the year.
B Rent was owed by the business at the start of the year.
C Rent income was receivable at the start of the year.
D Rent expense had been overstated in the previous year.

47. A customer’s account has balance c/d on the debit side at the end of the period. What does this usually mean?

A The customer owes the business money.
B The business owes the customer money or the customer has overpaid.
C The customer has bought more goods on credit.
D The account has no balance.

48. Which pair of entries records inventory bought on credit?

A Debit purchases, credit trade payable
B Debit trade payable, credit purchases
C Debit sales, credit trade receivable
D Debit trade receivable, credit sales

49. The owner pays a business expense using private funds. Which account is credited in the business books?

A Drawings
B Capital
C Bank
D Trade payable

50. A capital account shows:

Credit side: opening capital $40 000, profit for the year $6000, additional capital $5000
Debit side: drawings $8000

What is the closing capital?

A $37 000
B $43 000
C $51 000
D $59 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. B
   Debit bank, credit capital. Cash enters the business, and the owner’s capital increases.

2. C
   Debit total = 18 400, credit total = 13 900. Difference = 4500 debit balance.
   Balance c/d goes on the credit side, then balance b/d appears on the debit side.

3. B
   Equipment is an asset, so debit equipment. Zaman Traders is owed money, so credit Zaman Traders.

4. C
   Wrong entry was exactly reversed: debit sales $700, credit cash $700.
   Correct entry should be debit cash $700, credit sales $700.
   Correction = debit cash $1400, credit sales $1400.

5. B
   Customer returns goods, so sales returns increases: debit sales returns. Customer owes less: credit customer.

6. B
   Supplier’s debt decreases, so debit supplier. Discount received is income, so credit discount received.

7. D
   Trade payables normally have credit balances because the business owes them money.

8. B
   Asset accounts have debit balances, so balance c/d is inserted on the credit side to balance the account. Then balance b/d appears on debit side next period.

9. B
   Owner withdrawing cash is drawings. Debit drawings, credit cash.

10. A
    Bank received = $760. Discount allowed = $40. Customer’s debt cleared = $800.
    Debit bank $760, debit discount allowed $40, credit customer $800.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. A
    Debit side = 5000.
    Credit side = 3700 + 600 + 100 = 4400.
    Difference = $600 debit balance. Customer still owes $600.

12. B
    Goods bought on credit for resale: debit purchases, credit supplier.

13. B
    A payment to a supplier reduces the amount owed, so it is debited in the supplier’s account.

14. B
    For credit purchases, the supplier is credited because the business now owes the supplier.

15. A
    Goods returned to supplier reduce the supplier’s balance, so debit supplier. Purchases returns is credited.

16. B
    If balance c/d is on the debit side, the account has a credit balance carried down.

17. D
    Because the brought-down amount is stated to be on the debit side, it is treated as a debit balance in the wages account.
    Income statement transfer = 8200 + 500 + 300 = $9000.

18. B
    The loan liability decreases, so debit loan. The owner paid using private money, so capital increases: credit capital.

19. B
    Business paying the owner’s personal rent is drawings. Debit drawings, credit bank.

20. A
    A business expense paid by cheque is recorded as debit expense, credit bank.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

21. A
    Credit side = 2500 + 5600 = 8100.
    Debit side = 4000 + 300 + 100 = 4400.
    Difference = $3700. Since it is a credit balance, balance c/d is entered on the debit side.

22. A
    Debit side = 1200 + 2800 = 4000.
    Credit side = 2500 + 300 + 100 = 2900.
    Difference = $1100 debit balance. Customer still owes $1100.

23. A
    A debit balance in the cash account means the business has cash in hand.

24. B
    Motor vehicle enters the business as an asset: debit motor vehicles. Owner’s capital increases: credit capital.

25. B
    Writing off a debt reduces receivables and creates an expense. Debit irrecoverable debts, credit trade receivable.

26. A
    Owner taking goods is drawings at cost. Debit drawings, credit purchases.

27. B
    Discount received reduces the supplier’s account, so debit supplier. Discount received is income, so credit discount received.

28. A
    Paying an expense reduces bank and reduces profit/capital. Debit expense, credit bank.

29. A
    Discount received reduces the supplier liability and increases income/capital. Debit supplier, credit discount received.

30. B
    For an asset account: balance c/d appears on the credit side, and balance b/d appears on the debit side next period.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. B
    Debit side = 15 000 + 6000 = 21 000.
    Credit side = 4000.
    Difference = 17 000 debit balance, so balance c/d is placed on the credit side.

32. B
    A dishonoured cheque reverses the original receipt. The customer still owes the money. Debit customer, credit bank.

33. B
    Bank charges are an expense. Debit bank charges, credit bank.

34. B
    A credit balance on the bank account means the business has a bank overdraft.

35. B
    Sales returns reduce sales, so sales returns has a debit balance.

36. B
    Purchases returns reduce purchases, so purchases returns has a credit balance.

37. A
    When a credit customer returns goods: debit sales returns, credit customer.

38. B
    The unpaid difference is discount received. Debit supplier $60, credit discount received $60.

39. C
    Cash enters the bank, and a loan liability is created. Debit bank, credit loan from owner.

40. B
    Cash moves from cash in hand to bank. Debit bank, credit cash.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. B
    Cash received from a customer reduces the amount owed by the customer, so it is credited in the customer’s account.

42. D
    Goods bought on credit from a supplier increase the amount owed, so they are credited in the supplier’s account.

43. A
    Office equipment is an asset, so debit office equipment. Bank decreases, so credit bank.

44. C
    A statement of account is a document, not a ledger account.

45. B
    Cash received increases cash: debit cash. Rent income increases: credit rent received.

46. B
    A credit balance brought down in rent payable means rent was owed at the start of the year.

47. B
    If a customer’s account has balance c/d on the debit side, the account has a credit balance. This usually means the business owes the customer money or the customer has overpaid.

48. A
    Inventory bought on credit for resale is recorded as debit purchases, credit trade payable.

49. B
    If the owner pays a business expense using private funds, the business treats it as capital introduced. Credit capital.

50. B
    Closing capital = opening capital + profit + additional capital − drawings
    = 40 000 + 6000 + 5000 − 8000
    = $43 000.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.