Debits and Credits Quiz 2 Financial Accounting Quiz On Aug 10, 2024 Share /50 1234567891011121314151617181920212223242526272829303132333435363738394041424344454647484950 Debits and Credits Quiz 2 Multiple Choice questions 50 questions in 25 minutes Pass Score 70% 1 / 50 When an invoice is received for utilities, which account is debited? Cash Utilities Expense Prepaid Utilities Accounts Payable Utilities Expense is debited to record the cost of utilities incurred by the business. 2 / 50 Which of the following is true for a revenue account? It normally has a credit balance It is an asset account It is decreased by credits It is increased by debits Revenue accounts typically have a credit balance, reflecting income earned by the business. 3 / 50 Which of the following is true about the double-entry accounting system? Every transaction affects two or more accounts. It only records cash transactions. Both (Every transaction affects two or more accounts) and (Debits must always equal credits) 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. 4 / 50 What happens to the Accounts Receivable account when a customer pays their invoice? It decreases It increases It depends on the payment method No change Accounts Receivable is credited, reducing the balance as the amount owed is paid off. 5 / 50 When equipment is sold for cash, which account is debited? Sales Equipment Cash Accounts Receivable Cash is debited to reflect the increase in cash from the sale of equipment 6 / 50 What is the normal balance of a liability account? Credit Debit Neither Both Debit and Credit Liabilities normally carry a credit balance, reflecting amounts owed by the company. 7 / 50 Which of the following accounts typically has a debit balance? Capital Drawings Accounts Payable Revenue The Drawings account usually has a debit balance as it represents withdrawals by the owner. 8 / 50 When a business receives payment in advance from a customer, which account is credited? Cash Accounts Receivable Unearned Revenue Revenue Unearned Revenue is credited to record the liability until the service or product is delivered. 9 / 50 Which of the following accounts is increased by a debit? Accounts Payable Expenses Revenue Capital Expenses increase with a debit, reducing the overall equity in the business. 10 / 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. 11 / 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. 12 / 50 When the owner invests additional cash in the business, which account is credited? Revenue Accounts Receivable Owner's Equity Cash Owner’s Equity is credited to reflect the increase in equity from the additional investment. 13 / 50 When a company borrows money from a bank, which account is credited? Interest Payable Accounts Payable Cash Loan Payable Loan Payable is credited to recognize the liability created by borrowing funds. 14 / 50 When a company earns interest on its bank account, which account is credited? Accounts Receivable Interest Revenue Cash Accounts Payable Interest Revenue is credited to reflect the income earned from interest. 15 / 50 Which of the following transactions would increase a liability? Purchase of equipment with cash Payment to suppliers Receiving cash from customers Borrowing from a bank Borrowing increases liabilities as it represents an obligation to repay the bank 16 / 50 When a company pays rent in advance, which account is debited? Prepaid Rent Rent Expense Cash Accounts Payable Prepaid Rent is debited to record the payment made in advance for rent, which is considered an asset until used. 17 / 50 Which account is credited when goods are sold on credit? Accounts Receivable Cash Sales Inventory Sales are credited when goods are sold, reflecting an increase in revenue. 18 / 50 Which of the following is debited when inventory is purchased for cash? Inventory Cash Accounts Payable Cost of Goods Sold The Inventory account is debited to increase the asset as more inventory is acquired. 19 / 50 What happens to the Cash account when it is debited? It depends on the type of transaction It decreases No change It increases Debiting the Cash account increases the cash balance as more cash is being added. 20 / 50 What happens to the Retained Earnings account when dividends are declared? It increases No change It decreases It is debited Retained Earnings decreases when dividends are declared, reducing the amount available for reinvestment. 21 / 50 Which of the following is debited when a company pays off a loan? Interest Expense Loan Payable Cash Accounts Payable Loan Payable is debited to reduce the liability when the loan is paid off. 22 / 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. 23 / 50 Which account is credited when an invoice is sent to a customer for services rendered? Accounts Receivable Service Revenue Cash Unearned Revenue Service Revenue is credited to record the income earned from providing services. 24 / 50 What is the normal balance of the Capital account? It depends on the transaction Zero Debit Credit The Capital account typically has a credit balance, reflecting the owner’s equity in the business. 25 / 50 What happens to the Accounts Payable account when it is debited? It decreases It depends on the transaction No change It increases Debiting Accounts Payable reduces the balance, indicating a payment has been made. 26 / 50 Which of the following is debited when a company receives a loan? Interest Expense Loan Payable Cash Accounts Payable Cash is debited to reflect the increase in cash when a loan is received 27 / 50 Which account is debited when a business purchases inventory on account? Cost of Goods Sold Accounts Payable Cash Inventory Inventory is debited to reflect the acquisition of goods that will be sold to generate revenue 28 / 50 Which of the following accounts typically has a credit balance? Capital Expenses Inventory Cash The Capital account usually has a credit balance, representing the owner’s equity in the business. 29 / 50 When supplies are used up, which account is debited? Inventory Cash Supplies Supplies Expense Supplies Expense is debited to reflect the cost of supplies consumed in the business. 30 / 50 What happens to an expense account when it is debited? It stays the same It decreases It increases It is offset by a credit Debiting an expense account increases the total expense, reflecting higher costs incurred by the business. 31 / 50 Which account is debited when a company's insurance premium is paid in advance? Prepaid Insurance Accounts Payable Insurance Expense Cash Prepaid Insurance is debited to record the payment made in advance, treated as an asset until used 32 / 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. 33 / 50 Which account is credited when a service is provided on credit? Unearned Revenue Service Revenue Accounts Receivable Cash Service Revenue is credited to record the income earned from providing the service. 34 / 50 Which account is credited when a business owner withdraws cash for personal use? Drawings Accounts Payable Cash Owner's Equity Cash is credited as it decreases when the owner withdraws money. 35 / 50 Which account is credited when a customer pays their outstanding balance? Sales Interest Revenue Accounts Receivable Cash Accounts Receivable is credited to decrease the balance, reflecting payment received. 36 / 50 If a company purchases land, which account is debited? Capital Expenses Land Cash The Land account is debited to record the acquisition of the land as an asset 37 / 50 Which account is debited when an expense is paid in cash? Expense Capital Cash Accounts Payable The Expense account is debited to record the cost, reducing equity. 38 / 50 What is the effect on the capital account when it is credited? It decreases No effect It increases It depends on the transaction Crediting the capital account increases it, indicating an increase in the owner’s equity. 39 / 50 If a business owner withdraws cash for personal use, which account is debited? Drawing Owner's Equity Accounts Payable Cash Withdrawals for personal use reduce the owner’s equity, and the Drawing account is debited. 40 / 50 What happens to the Inventory account when inventory is sold? It depends on the type of sale It remains unchanged It decreases It increases The Inventory account is credited, reducing its balance as goods are sold 41 / 50 What happens to the Capital account when additional investments are made by the owner? It is debited No change It decreases It increases The Capital account is credited, increasing the owner's equity when more capital is invested. 42 / 50 Which account typically has a debit balance? Capital Revenue Accounts Payable Expenses Expenses typically have a debit balance, reflecting the costs incurred by the business. 43 / 50 If a customer returns goods, which account is debited? Sales Sales Returns Accounts Receivable Inventory Sales Returns is debited to reduce the revenue and acknowledge the return of goods. 44 / 50 Which of the following accounts would be debited when a dividend is paid? Revenue Retained Earnings Dividends Payable Cash Dividends Payable is debited to reduce the liability when the dividend is paid out. 45 / 50 What is the normal balance of the Accounts Receivable account? Credit It depends Debit Zero Accounts Receivable normally have a debit balance, representing amounts owed to the company. 46 / 50 When revenue is earned on account, which account is credited? Cash Unearned Revenue Accounts Receivable Revenue Revenue is credited to recognize the income earned by the business. 47 / 50 When an expense is incurred but not yet paid, which account is credited? Cash Revenue Accounts Payable Expenses Accounts Payable is credited to recognize the obligation to pay the expense in the future. 48 / 50 Which account is credited when office supplies are purchased on account? Office Supplies Cash Accounts Payable Inventory Accounts Payable is credited to recognize the obligation to pay for the office supplies in the future. 49 / 50 In a double-entry system, which side is the debit side? Right Top Left Bottom In the double-entry accounting system, the left side of an account is the debit side. 50 / 50 Which of the following is true for a credit entry? It increases liabilities It decreases liabilities It increases assets It increases expenses A credit entry typically increases liabilities, indicating more debt or obligations. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback accounting debits and creditsaccounting debits and credits cheat sheetaccounting equation debits and credits
