Great!
Here is a focused set of 50 Introduction to Accounting Questions with Answers under
the following themes:
🔹 1. Nature and Function of Accounting
🔹 2. Accounting Equation
🔹 3. Double Entry Bookkeeping
📘 Section 1: Nature and Function of Accounting (1–20)
1. What is accounting?
Answer: Accounting is the systematic process of identifying, recording, classifying,
summarizing, interpreting, and communicating financial information.
2. State two objectives of accounting.
Answer:
o To determine profit or loss
o To provide financial information for decision-making
3. Mention three users of accounting information.
Answer:
o Investors
o Creditors
o Management
4. What is financial accounting?
Answer: It is the branch of accounting concerned with recording, summarizing, and
reporting the transactions of a business.
5. What is bookkeeping?
Answer: Bookkeeping is the process of recording day-to-day financial transactions of a
business.
6. What is the main difference between accounting and bookkeeping?
Answer: Bookkeeping focuses on recording transactions, while accounting involves
interpreting and analyzing those records.
7. What are the qualitative characteristics of accounting information?
Answer: Relevance, reliability, comparability, and understandability.
8. Define capital.
Answer: Capital is the owner’s investment in the business.
9. What is the function of the income statement?
Answer: It shows the business’s profitability over a specific period.
10. What is the role of an accountant?
Answer: An accountant prepares and analyzes financial records to ensure accuracy and
compliance.
11. What is a financial statement?
Answer: A formal record of the financial activities and position of a business.
12. Give two types of financial statements.
Answer:
o Statement of Financial Position
o Income Statement
13. Name three elements of financial statements.
Answer:
o Assets
o Liabilities
o Equity
14. Define revenue.
Answer: Revenue is the income earned from the sale of goods or services.
15. Define expense.
Answer: Expense is the cost incurred in the process of earning revenue.
16. Why is accounting called the language of business?
Answer: Because it communicates financial information to stakeholders.
17. State the main purpose of accounting.
Answer: To provide financial information for decision-making.
18. What is a transaction?
Answer: A financial event that affects the financial position of a business.
19. State two types of accounting.
Answer:
o Financial Accounting
o Management Accounting
20. What is auditing?
Answer: Auditing is the independent examination of financial statements.
📘 Section 2: Accounting Equation (21–35)
21. State the basic accounting equation.
Answer:
Assets = Liabilities + Owner’s Equity
22. If assets are GH₵12,000 and liabilities are GH₵5,000, calculate equity.
Answer:
Equity = Assets - Liabilities = GH₵12,000 - GH₵5,000 = GH₵7,000
23. A business has equity of GH₵10,000 and liabilities of GH₵3,000. Calculate its
assets.
Answer:
Assets = Equity + Liabilities = GH₵10,000 + GH₵3,000 = GH₵13,000
24. If assets decrease by GH₵2,000 and liabilities decrease by GH₵2,000, what happens
to equity?
Answer:
No change in equity.
25. How does a loan received affect the accounting equation?
Answer:
Increases both assets (cash) and liabilities (loan payable).
26. How does the purchase of equipment with cash affect the accounting equation?
Answer:
Increases one asset (equipment), decreases another (cash); total assets unchanged.
27. How does capital introduced affect the equation?
Answer:
Increases both assets (cash) and equity (capital).
28. If a business earns revenue in cash, what is the effect?
Answer:
Increases assets (cash) and increases equity (through revenue).
29. If a business incurs an expense and pays cash, what is the effect?
Answer:
Decreases assets (cash) and decreases equity (through expense).
30. How do drawings affect the accounting equation?
Answer:
Decrease in assets and decrease in equity.
31. If assets are GH₵50,000 and equity is GH₵20,000, what are liabilities?
Answer:
Liabilities = Assets - Equity = GH₵50,000 - GH₵20,000 = GH₵30,000
32. Explain how profit affects the accounting equation.
Answer:
Profit increases owner’s equity.
33. What happens when the business buys goods on credit?
Answer:
Assets (inventory) increase, liabilities (creditors) increase.
34. How does receiving cash from a debtor affect the equation?
Answer:
Increases one asset (cash), decreases another (accounts receivable); total assets
unchanged.
35. What is the dual effect of every transaction?
Answer:
Each transaction affects at least two accounts and keeps the equation balanced.
📘 Section 3: Double Entry Bookkeeping (36–50)
36. What is the double entry system?
Answer: A system of accounting where every transaction has a dual effect—debit and
credit.
37. What is meant by ‘debit’?
Answer: An entry on the left side of an account, usually for increases in assets or
expenses.
38. What is meant by ‘credit’?
Answer: An entry on the right side of an account, usually for increases in liabilities,
equity, or income.
39. State the rules for debits and credits.
Answer:
o Debit: Increase in assets and expenses, decrease in liabilities and equity
o Credit: Increase in liabilities, equity, and income; decrease in assets
40. What is the journal?
Answer: The book of original entry where transactions are first recorded in chronological
order.
41. Record: Owner invests GH₵5,000 into the business.
Answer:
Dr. Cash GH₵5,000
Cr. Capital GH₵5,000
42. Record: Bought goods worth GH₵2,000 on credit.
Answer:
Dr. Inventory/Purchases GH₵2,000
Cr. Accounts Payable GH₵2,000
43. Record: Paid rent GH₵800.
Answer:
Dr. Rent Expense GH₵800
Cr. Cash GH₵800
44. Record: Sold goods for GH₵1,200 cash.
Answer:
Dr. Cash GH₵1,200
Cr. Sales GH₵1,200
45. Record: Bought office equipment for GH₵3,000 cash.
Answer:
Dr. Equipment GH₵3,000
Cr. Cash GH₵3,000
46. Record: Paid GH₵1,500 to a creditor.
Answer:
Dr. Accounts Payable GH₵1,500
Cr. Cash GH₵1,500
47. Record: Received GH₵2,000 from a debtor.
Answer:
Dr. Cash GH₵2,000
Cr. Accounts Receivable GH₵2,000
48. Record: Withdrew GH₵500 for personal use.
Answer:
Dr. Drawings GH₵500
Cr. Cash GH₵500
49. What is a ledger?
Answer: A book where journal entries are posted to individual accounts.
50. Why must total debits always equal total credits?
Answer: To maintain the accounting equation and ensure books are balanced.
