Question 1

On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September?

Accepted Answer

The beginning balance can be calculated by taking the ending balance, adding the total credits, and subtracting the total debits. So, $5,000 (ending balance) + $11,500 (credits) - $12,200 (debits) = $4,300 debit balance.

Question 2

A simple account form widely used in accounting to illustrate how debits and credits work is called a:

Accepted Answer

The simple account form widely used in accounting to illustrate how debits and credits work is called a T-account, which is the choice letter D. A T-account has a left side (debit) and a right side (credit) and is commonly used to track account balances in a visual manner. The other choices (A, B, C, and E) are not relevant to the topic of debits and credits in accounting.

Question 3

Which of the following statements is correct?

Accepted Answer

The left side of a T-account is always the debit side, and the right side is always the credit side. This is a fundamental principle of accounting. Option A is incorrect because the left side is always the debit side, and option D is incorrect because debits always increase asset and expense accounts and decrease liability, equity, and revenue accounts. Option B is incorrect because it states the opposite of what actually occurs. Option E is incorrect because every transaction must always balance, with the total debits equaling the total credits.

Question 4

An asset created by prepayment of an expense is:

Accepted Answer

When an expense is paid in advance or prepaid, it creates an asset for the company. This asset is recorded on the balance sheet as a debit to the prepaid expense account. Therefore, the correct choice is B.

Question 5

Double-entry accounting is an accounting system:

Accepted Answer

Double-entry accounting requires that each transaction or event is recorded with at least two accounts, with equal debits and credits. This ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced and accurate. The use of T-accounts is a common method to visualize the impact of transactions in double-entry accounting, but it is not a requirement. While double-entry accounting helps to reduce errors, it does not guarantee that errors will never occur.

Question 6

A credit is used to record:

Accepted Answer

The answer of A credit is used to record:
...

Question 7

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

Accepted Answer

The liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is recorded as a credit to an unearned revenue account. This is because the company has not yet earned the revenue and therefore, it is considered as a liability until the earnings process is complete.

Question 8

On October 31, a company's Cash account had a normal balance of $7,000. During October, the account was debited for a total of $4,250 and credited for a total of $5,340. What was the balance in the Cash account at the beginning of October?

Accepted Answer

The answer of On October 31, a company's Cash account...

Question 9

Which of the following is a true statement regarding debits and credits?

Accepted Answer

Assets and expenses are both increased with a debit, while liabilities and equity are increased with a credit. Therefore, choice D is the only true statement regarding debits and credits.

Question 10

A debit is used to record:

Accepted Answer

The answer of A debit is used to record:
...

Question 11

On November 30, a company had an Accounts Receivable balance of $5,100. During the month of December, total credits to Accounts Receivable were $76,000 from customer payments. The December 31 Accounts Receivable balance was $43,000. What was the amount of credit sales during December?

Accepted Answer

Normal balance = debit

Question 12

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months contract in advance. Management Services' general journal entry to record this transaction will include a

Accepted Answer

When a client pre-pays for services, the revenue is considered unearned until the services are rendered. Therefore, the journal entry will include a credit to unearned revenue (in this case, unearned management fees) for the amount received in advance, in this case $60,000. The corresponding debit will be to cash since the payment was received in cash. Therefore, choice D is the correct answer.

Question 13

On April 30, Holden Company had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?

Accepted Answer

The answer of On April 30, Holden Company had an...

Question 14

A credit entry:

Accepted Answer

A credit entry decreases asset and expense accounts, and increases liability, common stock, and revenue accounts. This is in accordance with the double-entry accounting system where debits and credits must balance.

Question 15

Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction?

Accepted Answer

The correct journal entry records the increase in assets (Cash and Land) and the corresponding increase in equity (Common Stock) for the total value contributed.

Question 16

An account balance is:

Accepted Answer

An account balance is the difference between the total debits and total credits for an account, including the beginning balance. This is known as the account's current balance. Choice A and B are incorrect because they only take into account one side of the account. Choice D is incorrect because it is the accounting equation, which may be used to help determine an account balance, but is not the balance itself. Choice E is incorrect because an account balance could be a credit or a debit depending on whether the total credits or debits are greater.

Question 17

Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a:

Accepted Answer

When Wisconsin Rentals purchased office supplies on credit, it means that they have an outstanding amount owed to the supplier. This is recorded as a liability in the form of Accounts Payable, so the entry should involve a Debit to Accounts Payable. And since they have not yet paid for the supplies, there should not be any Credit to Cash or Credit to Retained Earnings. Accounts Receivable is not involved in this scenario as it pertains to money owed to Wisconsin Rentals, not by them.

Question 18

Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky's general journal entry to record this transaction will include a

Accepted Answer

The answer of Rocky Industries received its telephone bill in...

Question 19

Which of the following statements is incorrect?

Accepted Answer

The normal balance of an expense account is a debit, not a credit. Expenses are typically debits because they represent a decrease in assets or an increase in liabilities.

Question 20

Of the following accounts, the one that normally has a credit balance is:

Accepted Answer

Sales Salaries Payable is a liability account that represents the amount owed to employees for salaries that have not yet been paid. Liabilities normally have a credit balance, so Sales Salaries Payable will have a credit balance. The other accounts listed are assets (Cash and Office Equipment) or expenses (Sales Salaries Expense) that typically have a debit balance, or a distribution of earnings to shareholders (Dividends) which would also have a debit balance.

Quiz 2: Analyzing and Recording Transactions