Question 1

What is the double entry accounting system?

Accepted Answer

The double-entry accounting system records each financial transaction in at least two accounts, ensuring that total debits always equal total credits. This method helps maintain balanced financial records, providing a clearer picture of a business's financial health.

Question 2

What is the basic rule of double-entry accounting?

Accepted Answer

The fundamental rule of double-entry accounting is that every transaction affects at least two accounts, with the total debits equaling the total credits. This ensures that the accounting equation—Assets = Liabilities + Equity—remains balanced.

Question 3

Can you give an example of double-entry accounting?

Accepted Answer

In a double-entry accounting example, if a business purchases equipment for ₹10,000, it records a debit in the Equipment account and a credit in the Cash account, balancing the two sides of the transaction.

Question 4

How does double-entry accounting differ from single-entry accounting?

Accepted Answer

Single-entry accounting records each transaction once, while double-entry accounting records it twice—once as a debit and once as a credit. Double-entry accounting provides a more comprehensive view of a company's finances by balancing both sides of the transaction.

Question 5

What is the principle behind double-entry accounting?

Accepted Answer

The principle of double-entry accounting is that every financial transaction has equal and opposite effects on at least two accounts. It ensures that for every debit, there is a corresponding credit, maintaining balance in the financial records.

Difference Between Single-Entry Accounting and Double-Entry Accounting

What Is Double Entry Accounting? Meaning, Types and Examples