Churreria Madrid 2505 Champlain St. N.W. 483-4441. Hours: 11 a.m. to 10:30 p.m., Tuesday through Sunday. Closed Monday. Atmosphere: Clattering cheerfulness. Price range: $2.75 to $7.75 for Spanish entrees with black beans and rice. Empanadas (meat pies) are 75 cents each. Reservations: Not accepted on Saturday and Sunday and probably not needed. Credit cards: Central Charge. Special Facilities: Downstairs dining room accessible by wheelchair. No high chairs.

Churreria Madrid is at its finest on Sunday afternoon as a place to stop for churros and hot chocolate. Churros are Spanish doughnuts, fried loops of batter sprinkled and sugar. The best way to eat them is alongside or dipped in the restaurant's rich, hot chocolate made with milk.

Churros give the restaurant its name and by themselves justify Churreria Madrid's existence. But everything else at the small Spanish restaurant is just as good. Among its othe virtues are its prices and atmosphere. Chureria Madrid is an easygoing, cheerful place, almost always full of families, where children are taken for granted.

Churreria Madrid recently reopened. For months it was closed for remodeling, expanding and acquiring a liquor license. It still holds the distinction of being one of the smallest restaurants in the city as well as "Washington's first and only churreria," as its menu proclaims.

We went there on a recent Sunday for lunch and found the menu, as well as the physical plant, new and expanded. The specials that day were beef in beer sauce and stuffed eggplant for $3.50 each. Everthing comes with beans and rice, and all the entrees make good-sized meals. They range from $2.75 to $7.75 for Bistek ala Pimienta (New York steak with green pepper and brown cream sauce), but most of the entrees are from $2.75 to $5. For a light lunch, you can buy empanadas (small beef pies) for 75 cents each, which is what I did for myself and my 2-year-old daughter, Sarah.

Sarah's father opted for the Milanesa, a Spanish version of chickenfried steak, with two fried eggs on top, rice and beans on the side, an indifferent salad and bread and butter, all for $3.65.

For dessert we had churros and hot chocolate. The downstairs is not much changed, but less crowed. Upstairs is slightly fancier, but most of the clientele seems to prefer the downstairs. It's a clattering, noisy dining room, but the noise doesn't offended. The waiter wanders from table to table, shouting the orders to the kitchen from where he stands-"Seis churros," "tres Coca-colas, uno sin heilo" or "una Miller." People come in and out to pick up carry-out orders as well, and the door to the kitchen swings back and forth creaking loudly. There are five booths and two small tables downstairs, and a slightly larger number of tables upstairs. The waiters run up the stairs with trays loaded with food for the diners. Who are predominantly Spanish-speaking.

It is not the sort of place where parents have to worry about their children making a mess or disturbing other diners.

On the day we were there, so were five other children besides Sarah who appeared to be younger than 5.

When they weren't eating churros, they mugged at each other over the backs of the booths. Sarah acquired a thick brown mustache from the chocolate and an uncurbable appetite for churros.

"This kid's still hungry. This kid still needs churros," she insisted long after we were through feeding them to her.

Checks at Churreria Madrid, a joy in their reasonableness, come with a built-in service charge in lieu of or in addition to tipping. Our check, for our lunches and two beers came to $11.88, of which $1.50 was the service charge.