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

Question 1

Explain the difference between expenses and withdrawals.

Answer 1

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 2

The word "debit" comes from which language?

A) Latin
B) French
C) Italian
D) Norsk

Answer 2

A

Question 3

An account had a starting debit balance of $350. There were debit postings of $400 and credit postings of $200 during the month. The ending balance is

A) $550 debit.
B) $450 credit.
C) $950 debit.
D) $200 debit.

Answer 3

A

Question 4

What device is used to record the increases and decreases caused by business transactions to individual assets, liabilities, and owner's equity?

A) Chart of accounts
B) Account
C) Trial Balance
D) Footings

Question 5

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 6

An account had a $500 credit starting balance. There were debit postings of $400 and credit postings of $150 during the month. The ending balance is

A) $250 credit.
B) $750 debit.
C) $1050 credit.
D) $150 credit.

Question 7

With respect to the balancing of an account, which one of these statements is FALSE?

A) If the total on the credit side was the larger, the balance is a credit.
B) Dollar signs are always used to designate a balance amount.
C) Footings of each side of the account are needed to determine the balance.
D) If the total on the debit side was the larger, the balance is a debit.

Question 8

When speaking of the Standard Account Form, it is TRUE to say that

A) It is widely used in business records today.
B) The form has no room for indicating either a debit or a credit.
C) There is no Date column included in this form.
D) All of a company's accounts together form a ledger.

Question 9

A chart of accounts is a listing of the accounts and their ending balances.

Question 10

Accounts Payable increases on the credit side of the account.

Question 11

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:
Asset - A Revenue - R None of the above - N
Liability - L Expense - E
b. In the second column, indicate the normal balance of the account by inserting a Dr. or Cr.
Account Type of Account Normal Balance
1. Office Supplies ________ ________
2. Accounts Receivable ________ ________
3. Fees Earned ________ ________
4. Thomas, Withdrawals ________ ________
5. Accounts Payable ________ ________
6. Salaries Expense ________ ________
7. Thomas, Capital ________ ________
8. Accounts Receivable ________ ________
9. Equipment ________ ________
10. Telephone Expense ________ ________

Question 12

Withdrawals increases on the debit side of the account.

Question 13

Revenue increases on the debit side of the account.

Question 14

One of the following statements does not help to explain the design of a T account:

A) The account has a balance.
B) The account has a left side.
C) The account has a right side.
D) The account has a title.

Question 15

Revenues are recorded when earned.

Question 16

Cash had a normal starting balance of $600. There were debit postings of $200 and credit postings of $300 during the month. The ending balance is

A) $500 credit.
B) $1,100 debit.
C) $500 debit.
D) $1,100 credit.

Question 17

The beginning balance in the Computers account was $2,500. The company purchased an additional $500 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 18

Accounts Receivable had a normal starting balance of $1000. There were debit postings of $800 and credit postings of $400 during the month. The ending balance is

A) $600 credit.
B) $1,400 debit.
C) $2,200 debit.
D) $1,400 credit.

Question 19

Cash increases on the debit side of the account.

Question 20

Which of these statements about T accounts is FALSE?

A) They are used mainly in classroom demonstrations.
B) They have both a left side and a right side.
C) They are used extensively in computer accounting.
D) Each account has a normal balance which is either a debit or a credit.

Question 21

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 22

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 23

The chart of accounts

A) is a numbered list of all of the business' accounts.
B) allows accounts to be balanced more accurately.
C) can be expanded as the business grows.
D) A and C are correct.

Question 24

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 25

The left side of any account is the

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

Question 26

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

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

Question 27

A credit may signify a(n)

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

Question 28

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 29

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 30

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 31

An account that would be increased by a credit is

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

Question 32

The right side of any account is the

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

Question 33

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 34

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.

Question 35

The Accounts Receivable account is

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

Question 36

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 37

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 38

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 39

Accounts Payable had a normal starting balance of $750. There were debit postings of $600 and credit postings of $350 during the month. The ending balance is

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

Question 40

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 41

The Accounts Payable account has a zero opening balance, total debit postings of $800 and credit postings of $1,400. The balance is

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

Question 42

Accounts Receivable has a normal balance of $1,000. After collecting $700, the balance in the account is

A) debit $300.
B) debit $1,700.
C) credit $300.
D) credit $1,700.

Question 43

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 44

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 45

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 46

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 47

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 48

The Accounts Receivable account has a zero opening balance, total debit postings of $1,700 and credit postings of $900. The balance of the account is

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

Question 49

Carrie flew to Toronto on a business trip. The purchase price of the ticket was $679 and it was bought from a travel agency on account. The entry to record the transaction is

A) debit Accounts Payable, $679; credit Travel Expense, $679.
B) debit Capital, $679; credit Accounts Payable, $679.
C) debit Travel Expense, $679; credit Accounts Payable, $679.
D) debit Travel Expense, $679; credit Cash, $679.

Question 50

Dennis, owner of Dennis' Golf Center, withdrew $700 in cash from the business. Record the transaction by

A) debiting Dennis, Withdrawals, $700; crediting Cash, $700.
B) debiting Accounts Receivable, $700; crediting Cash, $700.
C) debiting Expense, $700; crediting Cash, $700.
D) debiting Dennis, Withdrawals, $700; crediting Dennis, Capital, $700.

Question 51

The Withdrawals 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) an owner's equity component, and it has a normal debit balance.

Question 52

The owner of Wolverines R Us paid his personal MasterCard bill using a company cheque. 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 53

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

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

Question 54

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 55

Office Supplies had a normal starting balance of $75. There were debit postings of $90 and credit postings of $70 during the month. The ending balance is

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

Question 56

Extreme Home bought painting equipment on account for $2,200. The entry would include

A) debit to Supplies Expense, $2,200; credit to Cash, $2,200.
B) debit to Equipment, $2,200; credit to Cash, $2,200.
C) debit to Equipment, $2,200; credit to Accounts Payable, $2,200.
D) debit to Supplies Expense, $2,200; credit to Accounts Payable, $2,200.

Question 57

The beginning balance in Cash was $3,500. Additional cash of $1,000 was received. Cheques were written totaling $1,500. The cash balance is

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

Question 58

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 59

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 60

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 61

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 62

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 63

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 64

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 65

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 66

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 67

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 68

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 69

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 70

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 71

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 72

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 73

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 $100 and the credit is entered at $1,000.
D) None of these answers are correct.

Question 74

An account that would be increased by a debit is

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

Question 75

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 76

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 77

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 78

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 79

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 B are correct.

Question 80

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.