Accounting Basics Practice Quiz
Accounting Basics Practice Questions
Here are five true or false questions that every accountant should know the answer to. Can you get them all right?
Debits increase the balance of Liability accounts.
a) True
b) False
In a Trial Balance, the total of the Debit column must equal the total of the Credit column.
a) True
b) False
A business' Equity remains constant over time.
a) True
b) False
In modern accounting software Journal Entries don't exist. Transactions are recorded directly into the General Ledger.
a) True
b) False
In Accrual accounting, Revenue is recognized when it's earned. Not when Cash is received.
a) True
b) False
Scroll down to see the answers.
Accounting Basics Practice Question Video
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Accounting Basics Practice Answers
Here are the answers:
b) False. Debits decrease the balance of Liability accounts. Liabilities are Normal Credit Accounts so Credits increase Liabilities and Debits decrease them.
a) True. In a Trial Balance, the total of the Debit column must equal the total of the Credit column. This ensures that all entries are balanced as per the Double-Entry Accounting System.
b) False. Equity is the owner's claim on the Net Assets of a business. It changes whenever there is a movement in Net Assets.
b) False. All transactions are recorded in the General Ledger using Journal Entries. In modern accounting software, Journal Entries may be generated automatically.
a) True. Accrual accounting applies the Revenue Recognition Principle. This says that revenue should be recognized when it's earned, not when cash is received. This reflects the economic substance of transactions more accurately than Cash accounting.
Did you get everything right? Share your results in the comments below.
All in One Cheat Sheet and Practice Question Bundle
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