Question

Which of the following is TRUE regarding journal entries: a) There are always only two accounts affected b) The total amount debited must equal the total amount credited c) Journal entries show debits on the right and credits on the left d) Journal entries show credits first, then debits

Answer 1

Answer: b) The total amount debited must equal the total amount credited

Explanation:

Journal entries on the debit side must always equal entries on the credit side. This is to fulfil the Accounting requirement of Double Entry where every entry in the books must have an equal and corresponding entry as well.

There can be multiple accounts represented in the journal entry but the amount on the credit side needs to balance with the amount on the debit side.

For example, a good to sold to Hillary by Trump for $30. Trump gives Hillary a discount of 10%. Trump will record that entry as,

DR Cash $27

DR Sales Discount $3

CR Accounts Receivable $30

Notice that the Debit side has 2 accounts but they still add up to the $30 on the Credit side.