Federal Nursing Home Administrator Practice Exam

Disable ads (and more) with a membership for a one time $4.99 payment

Enhance your preparation for the Federal Nursing Home Administrator Exam with engaging multiple choice questions and detailed explanations. Gain the confidence to excel and ensure you're ready for every challenge!

Practice this question and more.

What is the relationship between debits and credits in double entry accounting?

Debits must equal credits for every entry
Credits always exceed debits
Debits are recorded quarterly, credits monthly
Debits are optional in financial statements

The correct answer is: Debits must equal credits for every entry

In double-entry accounting, every financial transaction affects at least two accounts, where one account is debited and another is credited. The fundamental principle of this system is that the total amount of debits must always equal the total amount of credits for each transaction. This relationship ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced, reflecting the double-sided nature of financial accounting. By requiring that debits equal credits, the system provides a method of self-checking the accuracy of the financial records. If the two are not equal, it signals an error that needs to be investigated. As a result, this balance forms a cornerstone of proper financial reporting and accountability within accounting practices. Other options suggest incorrect practices or misunderstandings about how transactions are recorded in accounting, emphasizing the importance of understanding the basic principles that underpin double-entry accounting.