Deck 2: Debits and Credits: Analyzing and Recording Business Transactions

Question 1

The left side of any account is the:

A)debit side.
B)credit side.
C)ending balance.
D)footings.

Answer 1

A

Question 2

A compound entry is:

A)a transaction involving more than one debit and/or credit.
B)used to prepare the trial balance.
C)the same as the chart of accounts.
D)found on the income statement.

Answer 2

A

Question 3

Explain the difference between expenses and withdrawals.

Answer 3

A withdrawal is used for recording the owner's withdrawal of company assets for personal use, and not related to the business. Expenses are costs the company incurs in carrying on operations in its effort to create revenue.

Question 4

A ledger:

A)is a group of accounts and their balances.
B)can replace the financial statements.
C)is the same as a chart of accounts.
D)None of these answers are correct.

Question 5

Revenues are recorded when earned.

Question 6

Why is Revenue increased on the Credit side? (Explain as it pertains to the expanded accounting equation and its relationship to Owner's Equity.)

Question 7

The beginning balance in the Computers account was $2,000. The company purchased an additional $1000 worth of computers. The balance in the account is:

A)debit of $2,000.
B)credit of $3,000.
C)debit of $3,000.
D)credit of $2,000.

Question 8

The Accounts Payable account is:

A)a revenue, and it has a normal debit balance.
B)an expense, and it has a normal credit balance.
C)a liability, and it has a normal debit balance.
D)a liability, and it has a normal credit balance.

Question 9

A credit may signify a(n):

A)increase in assets.
B)decrease in liabilities.
C)increase in capital.
D)increase in withdrawals.

Question 10

An account is said to have a debit balance if:

A)the footing of the debits exceeds the footing of the credits.
B)there are more entries on the debit side than on the credit side.
C)its normal balance is debit without regard to the amounts or number of entries on the debit side.
D)the last entry of the accounting period was posted on the debit side.

Question 11

Accounts Payable had a normal starting balance of $800. There were debit postings of $600 and credit postings of $300 during the month. The ending balance is:

A)$500 credit.
B)$1,000 debit.
C)$500 debit.
D)$1,000 credit.

Question 12

The side that increases the account balance, by the rules of debit and credit, is said to be the:

A)debit side.
B)credit side.
C)normal balance.
D)None of these answers are correct.

Question 13

The right side of any account is the:

A)debit side.
B)credit side.
C)ending balance.
D)footings.

Question 14

A chart of accounts:

A)is set up in alphabetical order.
B)includes account balances.
C)is a listing of all the accounts used by a company.
D)All of the above are correct.

Question 15

An accounting device used to record increases and decreases in individual assets, liabilities, capital, revenue, expenses, and withdrawals is a(n):

A)chart of accounts.
B)account.
C)trial balance.
D)footing.

Question 16

Accounts receivable increases on the debit side of the account.

Question 17

Selected accounts from the ledger of Thomas Company appear below. For each account, indicate the following:
a. In the first column at right, indicate the type of each account using the following abbreviations:
b. In the second column, indicate the normal balance of the account by inserting a Dr. or Cr.

Question 18

A formal account that has columns for date, explanation, post reference, debit, and credit is called the:

A)T account.
B)standard account form.
C)ledger.
D)chart of accounts.

Question 19

A debit may signify a(n):

A)increase in asset accounts.
B)increase in liability accounts.
C)increase in the capital account.
D)decrease in expense accounts.

Question 20

An account that would be increased by a credit is:

A)Cash.
B)Accounts Receivable.
C)Utilities Expense.
D)Accounts Payable.

Question 21

When recording transactions in two or more accounts and the totals of the debits and credits are equal, it is called:

A)debiting.
B)crediting.
C)posting.
D)double-entry bookkeeping.

Question 22

Dennis, owner of Dennis' Golf Center, withdrew $900 in cash from the business. Record the transaction by:

A)debiting Dennis, Withdrawals, $900; crediting Cash, $900.
B)debiting Accounts Receivable, $900; crediting Cash, $900.
C)debiting Expense, $900; crediting Cash, $900.
D)debiting Dennis, Withdrawals, $900; crediting Dennis, Capital, $900.

Question 23

Which of the following types of accounts has a normal credit balance?

A)Withdrawals
B)Assets
C)Expenses
D)Revenues

Question 24

Which of the following entries would be used to record the billing of fees earned?

A)Debit Accounts Receivable and credit Rental Fees
B)Credit Cash and credit Rental Fees
C)Debit Cash and credit Rental Fees
D)Debit Cash and debit Rental Fees

Question 25

Office Supplies had a normal starting balance of $75. There were debit postings of $80 and credit postings of $60 during the month. The ending balance is:

A)$55 debit.
B)$55 credit.
C)$95 debit.
D)$95 credit.

Question 26

The owner of BobCats R Us paid his personal MasterCard bill using a company check. The correct entry to record the transaction is:

A)credit Cash; debit Capital.
B)credit Cash; debit Supplies Expense.
C)credit Cash; debit Withdrawals.
D)credit Cash; debit Accounts Receivable.

Question 27

The entry to record Tom's payment of a home telephone bill is:

A)debit Telephone Expense; credit Accounts Payable.
B)debit Tom's Withdrawals; credit Cash.
C)debit Telephone Expense; credit Cash.
D)debit Tom's Withdrawals; credit Accounts Payable.

Question 28

The Accounts Payable account has total debit postings of $900 and credit postings of $1,500. The balance is:

A)$2,200 debit.
B)$600 credit.
C)$2,200 credit.
D)$600 debit.

Question 29

Which of the following entries records the investment of cash by John, owner of a sole proprietorship?

A)Debit John, Capital; credit Cash
B)Debit Cash; credit John, Withdrawals
C)Debit John, Withdrawals; credit Cash
D)Debit Cash; credit John, Capital

Question 30

The beginning balance in Cash was $3,500. Additional cash of $2,000 was received. Checks were written totaling $2,500. The cash balance is:

A)$2,000.
B)$6,000.
C)$4,500.
D)$3,000.

Question 31

Which of the following groups of accounts have a normal debit balance?

A)Revenue, liabilities, and capital
B)Assets, capital, and withdrawals
C)Liabilities, expenses, and assets
D)Assets, expenses, and withdrawals

Question 32

Which of the following types of accounts has a normal debit balance?

A)Withdrawals
B)Assets
C)Expenses
D)All of these answers are correct.

Question 33

Carrie flew to San Francisco on a business trip. The purchase price of the ticket was $422 and it was bought on account. The entry to record the transaction is:

A)debit Accounts Payable, $422; credit Travel Expense, $422.
B)debit Capital, $422; credit Accounts Payable, $422.
C)debit Travel Expense, $422; credit Accounts Payable, $422.
D)debit Travel Expense, $422; credit Cash, $422.

Question 34

Which of the following accounts would be increased by a debit?

A)Cash
B)Accounts Payable
C)Capital
D)Fees Earned

Question 35

The Accounts Receivable account has total debit postings of $1,900 and credit postings of $1100. The balance of the account is:

A)$800 debit.
B)$800 credit.
C)$2,600 credit.
D)$2,600 debit.

Question 36

The ledger is:

A)a group of accounts that records data from business transactions.
B)a tool used to make sure that all accounts have normal balances.
C)a chronological record of the day's transactions.
D)a tool used to ensure that debits equal credits.

Question 37

What is the proper entry to show the owner making an investment in the company?

A)A credit to Cash and a debit to Capital
B)A debit to Cash and a credit to Capital
C)A debit to Cash and a credit to Revenue
D)A credit to Cash and a debit to Revenue

Question 38

Which of the statements of the rules of debit and credit is true?

A)Decrease Accounts Receivable with a credit and the normal balance is a credit.
B)Increase Accounts Payable with a credit and the normal balance is a credit.
C)Increase Capital with a debit and the normal balance is a debit.
D)Decrease Cash with a debit and the normal balance is a debit.

Question 39

Accounts Receivable has a normal balance of $1,100. After collecting $800, the balance in the account is:

A)debit $300.
B)debit $1,900.
C)credit $300.
D)credit $1,900.

Question 40

Extreme Home bought painting equipment on account for $2,100. The entry would include:

A)debit to Supplies Expense, $2,100; credit to Cash, $2,100.
B)debit to Equipment, $2,100; credit to Cash, $2,100.
C)debit to Equipment, $2,100; credit to Accounts Payable, $2,100.
D)debit to Supplies Expense, $2,100; credit to Accounts Payable, $2,100.

Question 41

A credit to an asset account was posted to the Capital account. This error would cause:

A)assets to be overstated.
B)liabilities to be overstated.
C)Capital to be understated.
D)Both A and C are correct.

Question 42

A credit to an asset account was posted to a liability account. This error would cause:

A)assets to be understated.
B)liabilities to be overstated.
C)capital to be understated.
D)None of the above are correct.

Question 43

An asset would be debited and a liability credited if:

A)the business bought supplies for cash.
B)the business incurred an expense and paid it.
C)the business incurred an expense and did not pay for the expense immediately.
D)the business bought equipment on account.

Question 44

What would be the effect on accounts if the business provided services to a customer collecting cash?

A)An asset would be debited and an expense credited.
B)Capital would be debited and revenue credited.
C)An asset would be debited and revenue credited.
D)An asset would be debited and Capital credited.

Question 45

The chart of accounts:

A)is a numbered list of all of the business' accounts.
B)allows accounts to be located quickly.
C)can be expanded as the business grows.
D)All of the above are correct.

Question 46

What would be the effect on accounts if the business provided services to a customer on account?

A)An asset would be debited and an expense credited.
B)Capital would be debited and revenue credited.
C)An asset would be debited and revenue credited.
D)An asset would be debited and Capital credited.

Question 47

A debit to a liability account was posted to a revenue account. This error would cause:

A)revenues to be understated.
B)liabilities to be understated.
C)capital to be overstated.
D)None of the above are correct.

Question 48

A debit to an expense account was posted to a revenue account. This error would cause:

A)assets to be overstated.
B)liabilities to be overstated.
C)revenue to be understated.
D)None of the above are correct.

Question 49

A liability would be credited and an expense debited if:

A)the business paid a creditor.
B)the business incurred an expense and did not pay the expense immediately.
C)the business bought supplies on account.
D)the business bought supplies for cash.

Question 50

A debit to an asset account was posted to a liability account. This error would cause:

A)assets to be understated.
B)liabilities to be overstated.
C)capital to be overstated.
D)None of the above are correct.

Question 51

One asset would be debited and another credited if:

A)the business provided services to a cash customer.
B)the business paid a creditor.
C)the business bought supplies paying cash.
D)the business provided services to a credit customer.

Question 52

A credit to a liability account was posted to an expense account. This error would cause:

A)assets to be overstated.
B)liabilities to be overstated.
C)expenses to be overstated.
D)None of the above are correct.

Question 53

The business provided services to a cash customer. To record this:

A)an asset is debited and a liability is credited.
B)an asset is debited and a revenue is credited.
C)an expense is debited and Capital is credited.
D)None of these are correct.

Question 54

The business bought supplies on account. To record this:

A)an expense is debited and a liability is credited.
B)an asset is debited and an asset is credited.
C)an asset is debited and a liability is credited.
D)None of these are correct.

Question 55

The owner invested personal equipment in the business. To record this transaction:

A)debit Equipment and credit Accounts Payable.
B)debit Accounts Payable and credit Equipment.
C)debit Equipment and credit Capital.
D)credit Equipment and debit Capital.

Question 56

A credit to an asset account was posted to a revenue account. This error would cause:

A)assets to be overstated.
B)revenue to be overstated.
C)expenses to be overstated.
D)Both A and C are correct.

Question 57

The business incurred an expense and paid it immediately. To record this:

A)an expense is debited and a liability is credited.
B)an expense is debited and an asset is credited.
C)an expense is debited and Capital is credited.
D)None of these are correct.

Question 58

Which of the following errors would cause the trial balance to be out of balance?

A)An entry is posted twice.
B)An entry is not posted at all.
C)A debit is entered as $200 and the credit is entered at $2,000.
D)None of these answers are correct.

Question 59

A debit to a liability account was posted to the Capital account. This error would cause:

A)assets to be overstated.
B)liabilities to be overstated.
C)Capital to be overstated.
D)None of the above are correct.

Question 60

A debit to an asset account was posted to an expense account. This error would cause:

A)liabilities to be overstated.
B)expenses to be overstated.
C)assets to be understated.
D)Both B and C are correct.

Question 61

The debit side of all accounts decreases the balance and the credit side increases all accounts.

Question 62

What would be the effect on accounts if the owner withdrew cash?

A)An asset would be debited and an expense credited.
B)Withdrawals would be debited and an asset credited.
C)An asset would be debited and a revenue credited.
D)An asset would be debited and Capital credited.

Question 63

Debits must always equal credits.

Question 64

Double-entry accounting requires transactions to affect two or more accounts, and the total of the debits and credits must equal.

Question 65

Which of the following groups of accounts have a normal credit balance?

A)Revenue, liabilities, and capital
B)Assets, capital, and withdrawals
C)Liabilities, expenses, and assets
D)Assets, expenses, and withdrawals

Question 66

When the owner invests personal equipment in the business, cash is increased.

Question 67

Equipment is an example of a liability.

Question 68

Cash is debited when the business makes a payment for supplies.

Question 69

A T account is used for demonstration purposes.

Question 70

What would be the effect on accounts if the business purchased office supplies for cash?

A)An asset would be debited and an expense credited.
B)Capital would be debited and revenue credited.
C)An asset would be debited and revenue credited.
D)An asset would be debited and an asset credited.

Question 71

The credit side is always the right side of the account.

Question 72

The debit side is always the right side of the account.

Question 73

Only one account is affected in every transaction.

Question 74

What would be the effect on accounts if the business received the telephone bill but did not pay it immediately.

A)An expense would be debited and a liability credited.
B)Capital would be debited and revenue credited.
C)An expense would be debited and an asset credited.
D)An asset would be debited and Capital credited.

Question 75

The side of an account that increases the balance is always the same as the normal balance side.

Question 76

A compound entry is when more than one transaction occurs.

Question 77

An account that would be increased by a debit is:

A)Cash.
B)Fees Earned.
C)Capital.
D)Accounts Payable.

Question 78

After deciding which accounts are affected, the next step in analyzing a transaction is to determine to which categories the accounts belong.

Question 79

A transaction that involves more than one credit or more than one debit is called a compound entry.

Question 80

Withdrawals increase on the debit side of the account.