Which of the following statement is true according to the double-entry technique in accounting
Show Answer and explanation: The incorrect statements are options a and d. (a). Net asset value (NAV) usually displays the part in which the liabilities exceed assets. (d). The accounting equation of a firm is dependent upon the triple-entry accounting system. NAV (equity) displays the portion in which assets exceed the liabilities. It is simply the difference between what a firm owns and what it owes and the NAV increases when our assets exceed liabilities. Thus, option a is incorrect. Any firm’s accounting equation always depends upon the double entry accounting or bookkeeping system. Transactions affect both sides of the equation to keep this in balance. Thus, option d is incorrect. Wrong options: Option (b). A firm usually measures or indicates its financial position by using the accounting equation in which assets equal liabilities plus equity. Thus, this statement is correct. Option (c). A firm’s equity equals the entire valuables or assets less the entire claims against the particular valuables (i.e. liabilities). Thus, this statement is correct. Option (e). In the accounting equation, both the debit and credit sides must be equal after every transaction to keep the equation in balance using a double entry system. Thus, this statement is correct. What is Double-Entry?
ExplanationDouble-entry is the first step of accounting. To understand any accounting entryAccounting Entry is a summary of all the business transactions in the accounting books, including the debit & credit entry. It has 3 major types, i.e., Transaction Entry, Adjusting Entry, & Closing Entry. read more, one should know about this system. Each accounting transactionAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more is recorded in a minimum of two accounts, one is a debit account, and another is a credit account. Also, the transaction should be balanced, i.e., the credit amount should be equal to the debit amount. You are free to use this image on your website, templates, etc, Please provide us with an attribution linkArticle Link to be Hyperlinked Features of Double Entry
Principle of Double EntryDouble-entry is based on a simple principle, that for every debitDebit represents either an increase in a company’s expenses or a decline in its revenue. read more, must have equal and opposite credit. There should be at least two accounts involved in any transaction. Debit Side = Credit Side The double-entry is based on the debit and credit accounts of the transaction. So, we need to understand what account kind of debits and what credits. There are three different types of accounts, Real, Personal and Nominal AccountsNominal Accounts are the general ledger accounts which are closed by the end of an accounting period. Their balance at the end of period comes to zero so they don't appear in the balance sheet.read more. Rules of recording the transactions are decided based on the type of account. You are free to use this image on your website, templates, etc, Please provide us with an attribution linkArticle Link to be Hyperlinked #1 – Real Accounts – Debit what comes in and Credit what goes out. Real accountsReal accounts do not close their balances at the end of the financial year but retain and carry forward their closing balance from one accounting year to another. In other words, the closing balance of these accounts in one accounting year becomes the opening balance of the succeeding accounting year.read more include Pant & Machinery, Buildings, Furniture, or any other Asset account. So when we purchase Machinery, the Machinery account is debited, and when we sell Machinery, the Machinery account is credited. #2 – Personal Accounts – Debit the Receiver and Credit the Giver. The personal account includes the account of any person like an owner, debtor, creditor, etc. When we make payment to our creditors, the receiver account is debited, and when we receive the payment, the giver account is credited. #3 – Nominal Accounts – Debit all Expenses and Losses and Credit all Incomes and Gains. Nominal accounts include all the Expenses, Income, Profit, and Loss accounts. For example, the Salary Paid account is debited, and the rent received account is credited. Example of Double EntryHere are a few transactions for which Journal Entries are to be recorded. Record the entries in the Books of A Limited. A Limited Purchases Goods worth $2,500 from B Limited on Credit.
A Limited makes a payment for the Goods next Month.
A Limited Purchases Machinery worth $30,000 by paying cash:
A Limited received Rent on Building $1,500:
Difference Between Double Entry and Single Entry
Advantages
Disadvantages
ConclusionDouble Entry is the first step in maintaining a complete set of accounting. If the transactions are recorded correctly, the profit and loss account andA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more balance sheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more will provide accurate and complete results. Recommended ArticlesThis has been a guide to Double Entry. Here we discuss the rules and principles of double-entry along with its example, advantages, and disadvantages. You may also have a look at the following articles –
Which of the following is correct about doubleThe correct answer is Double Entry System. An accounting system that affects at least two accounts simultaneously with every transaction is called a double-entry system. It recognizes every transaction with a dual effect. In a double-entry system If one account is debited, any other account must be credited.
Which of the following is the doublePrinciple of Double Entry
Double-entry is based on a simple principle, that for every debit. read more, must have equal and opposite credit. There should be at least two accounts involved in any transaction. The double-entry is based on the debit and credit accounts of the transaction.
What is a doubleWith double-entry accounting, each journal entry updates at least two accounts in the company's general ledger, using an equal balance of debits and credits to those accounts. Because each journal entry uses both debits and credits, it is said to have two sides — hence the term “double-entry accounting.”
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