The 4th chapter of our accounting learning course is “Double Entry System”. In this article, we’ll learn the 25 most important double-entry system questions and their answers.
It will help you understand the important double-entry system terms and their explanations quickly.
You can read the previous three chapters of our accounting learning course here if you missed them.
- 25 Important Introduction to Accounting Questions and Answers [With PDF]
- 30 Important Accounting Transaction Questions and Answers [With PDF]
- 25 Important Account Questions and Answers [With PDF]
By reading this post, you may quickly prepare for accounting courses and for any competitive tests such as school and college exams, vivas, job interviews, and so on.
So let’s get started…
Double Entry System Questions and Answers
The 25 important double-entry system questions and answers are as follows:
Question 01: What is the Double Entry System?
Answer: A double-entry system is a method of recording both effects of a particular transaction in order to present a complete picture.
Question 02: Who is called the Father of the Double Entry System?
Answer: The famous mathematician Luca De Pacioli first wrote about the double-entry system in his famous book “Summa de Arithmetica, Geometria, Proportioniet Proportionalita” in 1494, and for this reason, Luca De Pacioli is known as the “Father of the Double Entry System.”
Question 03: What are the Benefits or Advantages of a Double Entry System?
Answer: The important benefits or advantages of the double-entry system are as follows:
- It is a complete and scientific accounting system
- Providing arithmetical accuracy of accounts
- Determine the profit and loss of the organization
- Determine the accurate financial position of the organization
- Detect and prevent errors and frauds
- Beneficial for long term planning
- It is a globally recognized accounting system
Question 04: What are the Limitations or Disadvantages of the Double Entry System?
Answer: The important limitations or disadvantages of the double-entry system are as follows:
- The complexity of the accounting method
- Requires an experienced individual
- Less time, labor, and money
- Probability of error
- Increase the work volume
- The problem for less education person
- Difficulty in determining dual aspect
Question 05: What are the Features or Principles of Double Entry System?
Answer: The features or principles of the double-entry system are as follows:
- Each transaction must have two parties, one debit, and the other credit.
- Each transaction automatically has a giver and a receiver.
- Using this method, each account of the business organization’s transactions is classified separately.
- The mathematical accuracy of the accounting can be easily verified using this method.
- This is a complete and scientific accounting method.
- By keeping accounts in this manner, it is simple to create a statement of the overall state of the business organization using the stored account information.
- Preserving accounts in this manner allows for a comparison of current and historical accounting information, which aids in determining future policy.
Question 06: Why the Double Entry System is called Scientific Method?
Answer: The arithmetic accuracy of the accounts can be easily verified by keeping the accounts in the double-entry system, which is why the double-entry system is called the scientific method.
Question 07: How is the duality of the transaction analyzed?
Answer: One party will receive and the other party will provide.
Question 08: What is Debit?
Answer: Debit means the left side of an account. In accounting, debit refers to the increase in assets, expenses, and decrease in Liabilities, owners’ equity, and income.
Question 09: What is Credit?
Answer: Credit means the right side of an account. In accounting, credit refers to the decrease in assets, expenses, and increase in Liabilities, owners’ equity, and income.
Question 10: How Many Methods are there for Finding out the Debit and credit from Transaction?
Answer: There are two methods for finding out the debit and credit from transactions that are as follows:
- Traditional Method
- Modern or Equation Method
Question 11: What is the traditional Method for Finding out the Debit and Credit from Transaction?
Answer: The traditional method for finding out the debit and credit from transactions is as follows:
Personal Account:
Benefits Receiver–Debit
Benefits Provider—Credit
Assets Account:
In case of increase in property or arrival of property–Debit
In case of decrease of property or loss of property—-Credit
Nominal Account:
All Expenses or Losses—Debit
All Incomes or Revenues–Credit
Question 12: What is the Modern or equation Method for Finding out the Debit and credit from Transactions?
Answer: The modern or equation method for finding out the debit and credit from the transaction is as follows:
| Sl. No. | Name of Accounts | The basis for Debit & Credit | Increase | Decrease |
| 1. | Assets | Dr | Dr | Cr |
| 2. | Expenses | Dr | Dr | Cr |
| 3. | Drawings | Dr | Dr | Cr |
| 4. | Liabilities | Cr | Cr | Dr |
| 5. | Capital | Cr | Cr | Dr |
| 6. | Income | Cr | Cr | Dr |
Question 13: What is the Basic and Expanded Accounting Equation?
Answer: The basic and expanded accounting equation is as follows:
Basic Accounting Equation:
A=L+OE
Here,
A=Assets
L= Liabilities
OE= owner’s equity
Expanded Accounting Equation:
A=L+OE+R-E-D
Here,
A=Assets
L= Liabilities
OE= owner’s equity
R=Revenue
E=Expenses
D=Drawings
Question 14: What Types of Books are maintained under the Double Entry System?
Answer: The types of books that are maintained under the double-entry system are as follows:
- Journal:
- Purchase book or purchase journal
- Sales book or sales journal
- Purchase return book or purchase return journal
- Sales return book or sales return journal
- Bills receivable book or notes receivable book
- Bills payable or notes payable journal
- Journal in a proper or general journal
- Cash book or cash journal
2. Ledger
Question 15: What is a Journal?
Answer: The primary book of account that records the day-to-day transactions of a business is called a journal.
Question 16: What is a Purchase Book or Purchase Journal?
Answer: A Purchase book or purchase journal is the primary book of account that is used to record transactions involving the purchase of goods on credit for business or sale purposes. Purchase journal is also called the daily purchase book.
Question 17: What is Sales Book or Sales Journal?
Answer: The primary book of accounts that is used to record transactions involving the sale of goods on credit is called the sales book or sales journal. Sales journal is also called daily sales book
Question 18: What is Purchase Return Book or Purchase Return Journal?
Answer: When the goods purchased on credit are returned to the creditor, the book in which the transaction is recorded is called a purchase return book or purchase return journal.
Question 19: What is Sales Return Book or Sales Return Journal?
Answer: When the goods sold on credit to the debtor are returned from the debtor, the book in which the transaction is recorded is called a sales return book or sales return journal.
Question 20: What is Bills or Notes Receivable Book?
Answer: The book in which bills received that are accepted or approved by the debtors are recorded is known as the bills receivable or notes receivable book.
Question 21: What is Bills or Notes Payable Book?
Answer: The bills or notes payable book is the book in which the approved bills in favor of the creditor are recorded.
Question 22: What is Journal in a Proper or General Journal?
Answer: Transactions that cannot be included in any of the categories are recorded in the journal in a proper or general journal.
Question 23: What is Cash Book?
Answer: A cash book is a book of accounts that records cash receipts and payments transactions.
Question 24: What is Ledger?
Answer: A ledger is a book of accounts that classify and permanently records business transactions.
Question 25: What is the difference between a Double Entry system and a Single Entry System?
Answer: The three important differences between a double-entry system and a single entry system are as follows:
- A double-entry accounting system is a complete and scientific accounting system, whereas a single entry accounting system is an incomplete and unscientific accounting system.
- In the double-entry system, the trial balance is prepared with the ledger balances, with the main purpose of verifying the mathematical accuracy of the account. In the single entry system, the trial balance is not prepared, making it impossible to verify the mathematical accuracy of the account.
- The double-entry accounting system is an internationally recognized accounting system, whereas the single entry system is not.
I hope that by the end of this post, you have a good understanding of the “Double Entry System” chapter.
You will gain a better understanding of the “Double Entry System” chapter if you read these 25 important double-entry system questions and answers on a regular basis.
Read:
- 20 Important Accounting Cycle Questions and answers [With PDF]
- 30 Important Accounting Journal Questions and Answers [With PDF]
- 30 Important Accounting Ledger Questions and Answers [With PDF]
- 30 Important Cash Book Questions and Answers [With PDF]
- 25 Important Trial Balance Questions and Answers [With PDF]
