Chapter 3: Double Entry Bookkeeping and Preparation of Financial Statements

Question 1

Explain:
DEAD CLIC

Answer 1

An increase in Expense, assets or drawings will create a debit
D - Debit
E - Expense
A - Assets
D - Drawings

An increase in liabilities, income or capital will create a credit
C - Credit
L - Liability
I - Income
C - Capital

Question 2

How do we record purchase of inventory?

Answer 2

Dr Purchases
Cr Cash/Trade Payables

Question 3

How do we record sales of inventory?

Answer 3

Dr Cash/Trade Receivables
Cr Sales Income

Question 4

What is the double entry for:
- Edward started a business with £20,000 in a business bank account

Answer 4

Dr Cash 20,000
Cr Capital 20,000

Question 5

What is the double entry for:
- paid rent of £1,500 cash

Answer 5

Cr Cash
Dr Rent Expense

Question 6

What is the double entry for:
- Made purchases for £350 cash

Answer 6

Dr Purchases 350
Cr Cash 350

Question 7

What is the double entry for:
- Bought Stationery for £55 cash

Answer 7

Cr Cash 55
Dr Stationery Expense 55

Question 8

What is the double entry for:
- made purchases from Joe for £245 on credit

Answer 8

Dr Purchases 245
Cr Trade Payables 245

Question 9

What is the double entry for:
- Sold books for £1,200 cash

Answer 9

Dr Cash
Cr Sales

Question 10

What is the double entry for:
- Took £250 from the business to pay for a holiday

Answer 10

Dr Drawings 250
Cr Cash