Question 1

Select the account below that normally has a credit balance.

Accepted Answer

Wages Payable is a liability account that normally has a credit balance. This means that the company owes money to its employees for work already done, so the balance is on the credit side.

Question 2

A debit is used to record which of the following?

Accepted Answer

A debit is used to record an increase in the dividends account, as dividends are considered a distribution of earnings and are recorded as a debit.

Question 3

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

Accepted Answer

Since Willow Rentals purchased office supplies on credit, they did not use cash, so there would be no credit to cash. Instead, they owe the amount of the purchase to the supplier, creating a liability known as Accounts Payable. The journal entry would include a credit to Accounts Payable to recognize the liability and a corresponding debit to the appropriate expense account (such as Office Supplies Expense) to record the use of those supplies in the business. Hence, the best choice is D, credit to Accounts Payable.

Question 4

A business uses a credit to record:

Accepted Answer

A credit is used to decrease an asset account. When a business receives credit, it is essentially borrowing money and increasing their liability, which must be paid back in the future. This decrease in an asset account reflects the borrowing of money and the increase in a liability.

Question 5

J. Brown Consulting paid $500 cash for utilities for the current month. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The answer of J. Brown Consulting paid $500 cash for...

Question 6

Identify the account below that impacts the Equity of a business.

Accepted Answer

The answer of Identify the account below that impacts the...

Question 7

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a:

Accepted Answer

The answer of Ralph Pine Consulting received its telephone bill...

Question 8

ABC Catering received $800 cash from a customer for catering services to be provided in the following month. Given the choices below, determine the general journal entry that ABC Catering will make to record this transaction.

Accepted Answer

The answer of ABC Catering received $800 cash from a...

Question 9

An asset created by prepayment of an insurance expense is:

Accepted Answer

When there is prepayment of insurance expense, it creates an asset called Prepaid Insurance. This asset is recorded as a debit to Prepaid Insurance, indicating an increase in the asset account.

Question 10

Grills R Us Catering provided $1,000 of catering services and billed its client for the amount owed. Given the choices below, determine the general journal entry that Grills R Us Catering will make to record this transaction.

Accepted Answer

The answer of Grills R Us Catering provided $1,000 of...

Question 11

Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction?

Accepted Answer

The answer of Wiley Consulting purchased $7,000 worth of supplies...

Question 12

A double-entry accounting system is an accounting system:

Accepted Answer

A double-entry accounting system records the effects of transactions and events in at least two accounts with equal debits and credits. This helps ensure accuracy and completeness of financial information. The other options are incorrect because recording each transaction twice (A) and recording transactions with two debits and no credits (C) are not the defining characteristics of a double-entry system. Additionally, the use of T-accounts (D) is a helpful tool for visualizing transactions, but it is not required for a double-entry system, and the claim that a double-entry system insures that errors never occur (E) is false, as errors can still be made in the recording and posting of transactions.

Question 13

Identify the account below that is classified as a liability account.

Accepted Answer

Accounts Payable is classified as a liability account as it represents money owed by a company to its creditors or suppliers.

Question 14

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

Accepted Answer

When Golddigger Services collects $60,000 in advance for 6-months of services, they have not yet earned the fees, so the transaction should be recorded with a credit to Unearned Management Fees for $60,000. This liability account represents the amount of fees that have been collected in advance but not yet earned. The corresponding debit should be to Cash for $60,000, since cash has been received. Therefore, the correct answer is D, Credit to Unearned Management Fees for $60,000.

Question 15

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. It is the net amount owed or owned by an account holder.

Question 16

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction.

Accepted Answer

The answer of J. Brown Consulting paid $2,500 cash for...

Question 17

Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?

Accepted Answer

The transaction involves the contribution of both cash and land, so these two assets must be separately identified in the journal entry. The Common Stock account is credited for the total amount of $200,000 because this represents the equity contributed by Richard Redden to the new business. Therefore, the journal entry should be: Debit Cash $70,000; Debit Land $130,000; Credit Common Stock $200,000. Option C is the only choice that reflects this entry.

Question 18

A credit entry:

Accepted Answer

A credit entry decreases asset and expense accounts, and increases liability, stockholders' equity, and revenue accounts.

Question 19

Identify the statement below that is correct.

Accepted Answer

The left side of a T-account is the debit side. This is the basic principle of double-entry accounting where each transaction should have an equal debit and credit entry in the accounting system. Choices A, B, and D are incorrect because they state the opposite of this principle. Choice E is also incorrect as the total amount debited should always equal the total amount credited to maintain accurate accounting records.

Question 20

A simple tool that is widely used in accounting to represent a ledger account and to understand how debits and credits affect an account balance is called a:

Accepted Answer

A T-account is a simple tool used in accounting that visually represents a ledger account. It has two sides, with the left side displaying debits and the right side displaying credits. This helps individuals to understand how transactions affect the balance of the account.

Quiz 2: Accounting System and Financial Statements