Debits and Credits Quiz 2 Financial Accounting Quiz On Jan 21, 2025 Share /50 1234567891011121314151617181920212223242526272829303132333435363738394041424344454647484950 Debits and Credits Quiz 2 Multiple Choice questions 50 questions in 25 minutes Pass Score 70% 1 / 50 Which account is debited when an expense is paid in cash? Capital Cash Accounts Payable Expense The Expense account is debited to record the cost, reducing equity. 2 / 50 Which of the following is true for a credit entry? It increases assets It increases expenses It decreases liabilities It increases liabilities A credit entry typically increases liabilities, indicating more debt or obligations. 3 / 50 If a customer returns goods, which account is debited? Sales Accounts Receivable Inventory Sales Returns Sales Returns is debited to reduce the revenue and acknowledge the return of goods. 4 / 50 When supplies are used up, which account is debited? Supplies Expense Cash Inventory Supplies Supplies Expense is debited to reflect the cost of supplies consumed in the business. 5 / 50 Which account typically has a debit balance? Accounts Payable Capital Expenses Revenue Expenses typically have a debit balance, reflecting the costs incurred by the business. 6 / 50 Which of the following is debited when a company pays off a loan? Cash Accounts Payable Interest Expense Loan Payable Loan Payable is debited to reduce the liability when the loan is paid off. 7 / 50 What happens to an expense account when it is debited? It is offset by a credit It increases It decreases It stays the same Debiting an expense account increases the total expense, reflecting higher costs incurred by the business. 8 / 50 What happens to the Capital account when additional investments are made by the owner? It increases No change It is debited It decreases The Capital account is credited, increasing the owner's equity when more capital is invested. 9 / 50 What happens to the Accounts Payable account when it is debited? No change It depends on the transaction It decreases It increases Debiting Accounts Payable reduces the balance, indicating a payment has been made. 10 / 50 Which of the following is credited when cash is received from a customer? Accounts Payable Cash Sales Accounts Receivable When cash is received from a customer, the Accounts Receivable is credited to decrease the balance as the debt has been settled. 11 / 50 Which of the following transactions would increase a liability? Payment to suppliers Borrowing from a bank Receiving cash from customers Purchase of equipment with cash Borrowing increases liabilities as it represents an obligation to repay the bank 12 / 50 What is the effect on the capital account when it is credited? It depends on the transaction It decreases No effect It increases Crediting the capital account increases it, indicating an increase in the owner’s equity. 13 / 50 In a double-entry system, which side is the debit side? Top Bottom Right Left In the double-entry accounting system, the left side of an account is the debit side. 14 / 50 Which account is credited when goods are sold on credit? Cash Accounts Receivable Inventory Sales Sales are credited when goods are sold, reflecting an increase in revenue. 15 / 50 Which of the following accounts would be debited when a dividend is paid? Cash Retained Earnings Dividends Payable Revenue Dividends Payable is debited to reduce the liability when the dividend is paid out. 16 / 50 Which of the following accounts typically has a debit balance? Drawings Revenue Accounts Payable Capital The Drawings account usually has a debit balance as it represents withdrawals by the owner. 17 / 50 If a company purchases equipment on credit, which account is debited? Accounts Payable Equipment Capital Cash Equipment is debited to reflect the addition of the asset to the company’s books. 18 / 50 Which account is credited when office supplies are purchased on account? Cash Accounts Payable Inventory Office Supplies Accounts Payable is credited to recognize the obligation to pay for the office supplies in the future. 19 / 50 When revenue is earned on account, which account is credited? Cash Accounts Receivable Revenue Unearned Revenue Revenue is credited to recognize the income earned by the business. 20 / 50 Which account is debited when a company's insurance premium is paid in advance? Cash Accounts Payable Insurance Expense Prepaid Insurance Prepaid Insurance is debited to record the payment made in advance, treated as an asset until used 21 / 50 Which account is debited when a business purchases inventory on account? Cash Inventory Cost of Goods Sold Accounts Payable Inventory is debited to reflect the acquisition of goods that will be sold to generate revenue 22 / 50 What is the normal balance of a liability account? Debit Neither Both Debit and Credit Credit Liabilities normally carry a credit balance, reflecting amounts owed by the company. 23 / 50 Which of the following is true about the double-entry accounting system? It only records cash transactions. Debits must always equal credits. Every transaction affects two or more accounts. Both (Every transaction affects two or more accounts) and (Debits must always equal credits) The double-entry system requires that each transaction affects at least two accounts and that total debits equal total credits. 24 / 50 Which account is credited when a business owner withdraws cash for personal use? Owner's Equity Cash Accounts Payable Drawings Cash is credited as it decreases when the owner withdraws money. 25 / 50 Which account is credited when an invoice is sent to a customer for services rendered? Accounts Receivable Cash Service Revenue Unearned Revenue Service Revenue is credited to record the income earned from providing services. 26 / 50 Which of the following is debited when a company receives a loan? Interest Expense Cash Loan Payable Accounts Payable Cash is debited to reflect the increase in cash when a loan is received 27 / 50 When an expense is incurred but not yet paid, which account is credited? Revenue Cash Accounts Payable Expenses Accounts Payable is credited to recognize the obligation to pay the expense in the future. 28 / 50 Which account is credited when a service is provided on credit? Cash Unearned Revenue Accounts Receivable Service Revenue Service Revenue is credited to record the income earned from providing the service. 29 / 50 When the owner invests additional cash in the business, which account is credited? Accounts Receivable Owner's Equity Revenue Cash Owner’s Equity is credited to reflect the increase in equity from the additional investment. 30 / 50 Which of the following is true for a revenue account? It is decreased by credits It is an asset account It is increased by debits It normally has a credit balance Revenue accounts typically have a credit balance, reflecting income earned by the business. 31 / 50 Which of the following is debited when inventory is purchased for cash? Cash Accounts Payable Inventory Cost of Goods Sold The Inventory account is debited to increase the asset as more inventory is acquired. 32 / 50 Which of the following accounts is increased by a debit? Accounts Payable Capital Revenue Expenses Expenses increase with a debit, reducing the overall equity in the business. 33 / 50 When a company borrows money from a bank, which account is credited? Accounts Payable Loan Payable Interest Payable Cash Loan Payable is credited to recognize the liability created by borrowing funds. 34 / 50 Which account is credited when a customer pays their outstanding balance? Interest Revenue Cash Accounts Receivable Sales Accounts Receivable is credited to decrease the balance, reflecting payment received. 35 / 50 When a company earns interest on its bank account, which account is credited? Cash Accounts Payable Accounts Receivable Interest Revenue Interest Revenue is credited to reflect the income earned from interest. 36 / 50 What is the normal balance of the Accounts Receivable account? Credit Debit Zero It depends Accounts Receivable normally have a debit balance, representing amounts owed to the company. 37 / 50 If a business owner withdraws cash for personal use, which account is debited? Cash Accounts Payable Owner's Equity Drawing Withdrawals for personal use reduce the owner’s equity, and the Drawing account is debited. 38 / 50 Which of the following accounts is credited when a dividend is declared? Cash Dividends Payable Retained Earnings Revenue Dividends Payable is credited to record the liability created by declaring a dividend. 39 / 50 When an invoice is received for utilities, which account is debited? Cash Prepaid Utilities Accounts Payable Utilities Expense Utilities Expense is debited to record the cost of utilities incurred by the business. 40 / 50 What happens to the Retained Earnings account when dividends are declared? It decreases It increases It is debited No change Retained Earnings decreases when dividends are declared, reducing the amount available for reinvestment. 41 / 50 If a company purchases land, which account is debited? Land Cash Expenses Capital The Land account is debited to record the acquisition of the land as an asset 42 / 50 When equipment is sold for cash, which account is debited? Cash Equipment Sales Accounts Receivable Cash is debited to reflect the increase in cash from the sale of equipment 43 / 50 When a company pays rent in advance, which account is debited? Prepaid Rent Cash Accounts Payable Rent Expense Prepaid Rent is debited to record the payment made in advance for rent, which is considered an asset until used. 44 / 50 When a business receives payment in advance from a customer, which account is credited? Accounts Receivable Revenue Unearned Revenue Cash Unearned Revenue is credited to record the liability until the service or product is delivered. 45 / 50 Which account is credited when wages are paid to employees? Wages Payable Accounts Payable Wages Expense Cash Cash is credited as it decreases when wages are paid. 46 / 50 What happens to the Cash account when it is debited? It depends on the type of transaction No change It decreases It increases Debiting the Cash account increases the cash balance as more cash is being added. 47 / 50 What happens to the Accounts Receivable account when a customer pays their invoice? No change It depends on the payment method It decreases It increases Accounts Receivable is credited, reducing the balance as the amount owed is paid off. 48 / 50 What is the normal balance of the Capital account? It depends on the transaction Debit Credit Zero The Capital account typically has a credit balance, reflecting the owner’s equity in the business. 49 / 50 What happens to the Inventory account when inventory is sold? It increases It depends on the type of sale It remains unchanged It decreases The Inventory account is credited, reducing its balance as goods are sold 50 / 50 Which of the following accounts typically has a credit balance? Cash Expenses Capital Inventory The Capital account usually has a credit balance, representing the owner’s equity in the business. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback accounting debits and creditsaccounting debits and credits cheat sheetaccounting equation debits and credits
