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Recording Of Transactions

Test Your Understanding

1. Double entry accounting requires that:
1. All transactions that create debits to asset accounts must create
credits to liability or capital accounts;
2. A transaction that requires a debit to a liability account require a
credit to an asset account;
3. Every transaction must be recorded with equal debits equal total
credits.
2. State different kinds of transactions that increase and decrease capital.
(Capital increases by net profit and fresh capital introduced, decreases
by drawings and net loss)
3. Does a debit always mean increase and credit always mean decrease?
No
4. Which of the following answers properly classifies these commonly used
accounts:
1. Building
2. Wages
3. Credit sales
4. Credit purchases
5. Electricity charges due but not yet paid (outstanding electricity bills)
6. Godown rent paid in advance (prepaid godown rent)
7. Sales
8. Fresh capital introduced
9. Drawings
10. Discount paid

Test Your Understanding

State the title of the accounts affected, type of account and the account to
be debited and account to be credited:
₹

1. Bhanu commenced business with cash 1,00,000

2. Purchased goods on credit from Ramesh 40,000

3. Sold goods for cash 30,000