Home » Questions » Double entry or Debit and Credit Short Answer Questions




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1. What are debit and credit?

Debit and credit are Latin words. Debit and Credit represent the two aspects of a transaction which means they are the part of double entry system.

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2. What is an account?

Account is a record which keeps the detail of transactions related to an item such as sales, purchases, account payable etc

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3. What is a double entry system of accounting?

A system of accounting in which dual (two, double) aspects of a transactions is recorded

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4. What is a single entry system of accounting?

When only one (single) aspect of a transaction is recorded in the books of account, it is referred to as single entry system

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5. What is the difference between single and double entry systems?

Single entry system records only one aspect of a transaction whereas double entry system records two or double aspects of a transaction or economic event

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6. State any two major benefits of double entry system?

Double entry system facilitates the preparation of financial statements such as income statement, balance sheet and cash flow statement etc

Record maintained under double entry system is regarded as more accurate and perfect as well as there are low chances of misappropriations, embezzlements and frauds

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7. State any two major drawbacks of single entry system?

Single entry system doesn’t facilitate the preparation of financial statements such as income statement, balance sheet and cash flow statement etc

Record maintained under single entry system is regarded as less accurate and perfect as well as there are high chances of misappropriations, embezzlements and frauds

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8. What are the different classes of accounts?

There are two main categories of accounts:

Nominal or income statement accounts
Real or balance sheet accounts

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9. What are nominal accounts?

The accounts that are closed off at the end of an accounting period and their balances are shown in the income statement. For example purchases account, sales accounts, commission account, salaries account etc

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10. What are real accounts?

The accounts that are not closed off at the end of an accounting period rather than their balances are transferred to the next accounting period and their balances are displayed in the balance sheet. For example fixed assets accounts, building account, cash account, capital account, debtor account etc

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11. How to debit an account?

An increase in assets and expenses accounts is debited while a decrease in incomes, capital and liabilities accounts is credited

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12. How to credit an account?

A decrease in assets and expenses accounts is credited while an increase in incomes, capital and liabilities accounts is credited

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13. How to debit and credit a revenue or income account?

When there is an increase in income account, it is credited and when there is a decrease in income account, it is debited

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14. How to debit and credit an expense?

When there is an increase in expense account, it is debited and when there is a decrease in expense account, it is credited

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15. How to debit and credit a liability?

When there is an increase in liability account, it is credited and when there is a decrease in liability account, it is debited

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16. How to debit and credit the capital?

When there is an increase in capital account, it is credited and when there is a decrease in capital account, it is debited

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17. How to debit and credit assets?

When there is an increase in asset account, it is debited and when there is a decrease in asset account, it is credited

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18. What does a/c mean?

a/c is short for the word account. It is an accounting custom to use a/c rather than writing “account”. It has been developed over time since accountants have realized that it is much easier to write a/c instead of writing account

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19. How to debit and credit stock or inventory?

Since stock or inventory is an asset, debiting and crediting rules for stock/inventory are same as other assets. An increase in stock is accounted as a debit and a decrease is considered as a credit

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20. What are personal accounts?

An account which is related to a person or an organization is considered as personal account such as account receivable and account payable

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21. What are the types of personal accounts?

There are three main types of personal accounts:

Natural personal account such as Mr. X account Mr. Y account
Artificial personal account such as XYZ company account, ABC firm account
Representative personal account for example Mr. X’s salary account

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