Question 1

When a business records revenue earned, the revenue account is always credited.

Accepted Answer

In accounting, when a business records revenue earned, it increases the revenue account, which is done by crediting the account according to the double-entry bookkeeping system.

Question 2

Which of the following accounts decreases with a debit?

Accepted Answer

Bills payable is a liability account, and liabilities decrease with a debit.

Question 3

A business purchases equipment for cash in the amount of $8 000. Which account is credited?

Accepted Answer

When equipment is purchased for cash, the cash account is credited to reflect the decrease in cash.

Question 4

A business makes a cash payment of $12 000 to an account payable. Which account is debited?

Accepted Answer

When a business makes a cash payment to settle an account payable, the Accounts Payable account is debited to decrease the liability.

Question 5

The accounting process of copying a transaction from the journal to the ledger is called:

Accepted Answer

Posting is the process of copying a transaction from the journal to the ledger.

Question 6

When a business records an expense incurred, the expense account is always credited.

Accepted Answer

When a business records an expense incurred, the expense account is always debited (increased).

Question 7

Which of the following statements about revenue is CORRECT?

Accepted Answer

Revenues increase owners' equity, and therefore, the normal balance of a revenue account is a credit balance.

Question 8

The first step of journalising an entry is to:

Accepted Answer

The answer of The first step of journalising an entry...

Question 9

Which of the following is the order of steps to journalise an entry?

Accepted Answer

The correct order is to first identify each account affected, then determine whether each account increases or decreases, and finally record the transaction.

Question 10

For Revenues, the category of account and its normal balance are:

Accepted Answer

Revenues increase owners' equity and have a normal credit balance.

Question 11

Which of the following is NOT an example of a source document?

Accepted Answer

A journal is not a source document; it is a record where transactions are recorded, while source documents are original records of transactions.

Question 12

A business purchases equipment for cash in the amount of $8 000. Which account is debited?

Accepted Answer

Equipment is an asset account and is debited when the business purchases equipment.

Question 13

A business renders service to a client and sends out a sales invoice. The amount will be collected from the customer at a later time. Which of the following would be TRUE at the time when the invoice is sent out?

Accepted Answer

When a sales invoice is sent out, it recognizes revenue, which increases profit. The accounts receivable (an asset) increases, but there is no immediate cash inflow, so total assets remain unchanged at this point.

Question 14

An owner invests $20 000 in her new business by depositing the cash in the business bank account. Which account is credited?

Accepted Answer

The answer of An owner invests $20 000 in her...

Question 15

When a business makes a cash payment, the cash account is always debited.

Accepted Answer

When a business makes a cash payment, the cash account is credited, reflecting a decrease in the business's cash balance.

Question 16

When a business collects cash, the cash account is always debited.

Accepted Answer

When a business collects cash, it is increasing its cash balance, therefore the Cash account is debited.

Question 17

The normal sequence of information flow in an accounting system is:

Accepted Answer

The normal sequence of information flow in an accounting system is source document, journal, ledger. Source documents are the original records of transactions, which are then recorded in journals, and finally posted to ledgers.

Question 18

Which of the following is the last step of journalising an entry?

Accepted Answer

The last step of journalizing an entry is to record the transaction in the journal, including a brief explanation. Posting to the ledger is a separate process that follows journalizing.

Question 19

Which of the following accounts increases with a debit?

Accepted Answer

Cash is an asset account, and asset accounts increase with a debit.

Question 20

An owner invests $20 000 in her new business by depositing the cash in the business bank account. Which account is debited?

Accepted Answer

The cash account is debited because the business is receiving cash, which increases the asset account.

Quiz 2: Recording Business Transactions