Debits and Credits Quiz 1 Financial Accounting Quiz Last updated Aug 10, 2024 Share /50 1234567891011121314151617181920212223242526272829303132333435363738394041424344454647484950 Debits and Credits Quiz 1 True or False questions 50 questions in 25 minutes Pass Score 70% 1 / 50 Debits and credits must always be equal in every journal entry. False True This is a fundamental principle of double-entry bookkeeping; every debit must have a corresponding credit. 2 / 50 A debit to cash indicates an outflow of cash. False True A debit to cash indicates an inflow, increasing the cash account balance. 3 / 50 Sales returns are credited to decrease the revenue account. True False Sales returns reduce revenue, so they are debited. 4 / 50 A credit to the sales account decreases its balance. False True Sales increase with credits, so a credit increases the balance of the sales account. 5 / 50 Interest income is increased with a credit entry. False True Interest income is a revenue account, which increases with a credit. 6 / 50 A credit entry reduces the balance of an asset account. True False Credits reduce asset accounts because they decrease on the credit side. 7 / 50 The normal balance of a dividends account is a debit. True False Dividends reduce equity, so they have a normal debit balance. 8 / 50 Unearned revenue decreases with a credit entry. True False Unearned revenue, a liability, increases with a credit 9 / 50 Advertising expense is credited to increase its balance False True Advertising expense is an expense account, which increases with a debit. 10 / 50 Sales discounts are debited when recorded. True False Sales discounts reduce revenue and are recorded with debits. 11 / 50 Unearned revenue is recorded as a debit. False True Unearned revenue is a liability and is recorded with a credit. 12 / 50 The normal balance of an expense account is a credit. True False The normal balance of an expense account is a debit. 13 / 50 Credits decrease liability accounts. False True Credits increase the balance of liability accounts. 14 / 50 Revenue accounts decrease with debit entries. False True Revenue accounts, part of equity, decrease with debit entries 15 / 50 Interest payable is debited when paid. False True Paying off interest payable reduces the liability, so it is debited. 16 / 50 Liabilities are increased by a debit entry. False True Liabilities increase with a credit entry and decrease with a debit entry. 17 / 50 Rent expense is increased with a debit entry. True False Rent expense, like other expenses, increases with a debit. 18 / 50 Prepaid expenses are recorded with a credit. True False Prepaid expenses are assets and are recorded with debits. 19 / 50 A debit entry in a liability account will increase its balance. True False A debit entry decreases the balance of a liability account. 20 / 50 Owners' equity decreases with a debit entry. True False Owners' equity accounts decrease with debits and increase with credits. 21 / 50 Cost of goods sold is increased by a credit entry. False True Cost of goods sold is an expense account, which increases with debits. 22 / 50 Wages payable is debited when the payment is made. False True Wages payable is a liability, so paying it off decreases the account balance with a debit. 23 / 50 A credit entry increases an expense account. True False Expense accounts increase with a debit entry and decrease with a credit entry. 24 / 50 The purchase of equipment on credit is recorded with a debit to the Equipment account and a credit to the Accounts Payable account. False True Equipment is an asset (increased with a debit), and Accounts Payable is a liability (increased with a credit). 25 / 50 A credit to a liability account will decrease its balance. True False A credit to a liability account increases its balance. 26 / 50 Retained earnings increase with a debit entry. True False Retained earnings increase with credits and decrease with debits. 27 / 50 Accrued liabilities are credited when recognized. False True Accrued liabilities represent obligations and are recorded with a credit. 28 / 50 A debit entry decreases the balance of a revenue account. True False Revenue accounts, part of equity, decrease with debits. 29 / 50 A debit in the dividends account increases equity. True False Dividends decrease equity, so a debit to the dividends account decreases equity. 30 / 50 The normal balance for an accounts receivable account is a credit. False True Accounts receivable is an asset account, and its normal balance is a debit. 31 / 50 The cash account is increased by crediting it. False True Cash is an asset account, which increases with debits. 32 / 50 A credit entry in the capital account increases its balance. True False The capital account represents owners' equity and increases with credits. 33 / 50 Revenues are recorded with a credit entry. True False Revenues increase the equity of a business and are recorded with credits. 34 / 50 Equity accounts are decreased by a credit entry. True False Equity accounts increase with credits and decrease with debits. 35 / 50 A debit entry to the owner’s capital account decreases equity. False True A debit in the capital account decreases owner’s equity. 36 / 50 A debit entry in a liability account increases its balance. True False A debit entry decreases the balance of a liability account. 37 / 50 When recording depreciation, a debit is made to an expense account. False True Depreciation is an expense, so it increases with a debit entry. 38 / 50 A debit entry increases an asset account. False True Debiting an asset account increases its balance, as assets are recorded on the debit side of the balance sheet. 39 / 50 The purchase of supplies on account is recorded with a debit to the Supplies account. True False Supplies are an asset, so purchasing them on account increases the Supplies account with a debit. 40 / 50 Accumulated depreciation is recorded with a debit. False True Accumulated depreciation is a contra-asset account and is increased with a credit. 41 / 50 The normal balance of an asset account is a debit. False True Asset accounts have a normal debit balance, meaning they increase with debits. 42 / 50 A debit to the supplies account indicates that supplies were purchased. False True Debiting the supplies account shows an increase, reflecting a purchase. 43 / 50 A debit entry in an asset account decreases its balance. True False A debit entry increases the balance of an asset account. 44 / 50 A credit entry increases the balance of a revenue account. True False Revenue accounts increase with credits, boosting equity. 45 / 50 Debits and credits must balance only at the end of the accounting period. True False Debits and credits must balance for every single transaction. 46 / 50 Accrued expenses are debited when recognized. True False Accrued expenses are liabilities and are recorded with a debit. 47 / 50 Dividends paid to shareholders are credited to the cash account. False True Paying dividends reduces cash, so cash is credited 48 / 50 Prepaid insurance is increased by a debit entry. False True Prepaid insurance is an asset account and increases with debits. 49 / 50 Accounts payable increase with a debit entry. False True Accounts payable is a liability, which increases with a credit. 50 / 50 Debits and credits apply only to cash transactions. False True Debits and credits apply to all types of transactions, not just cash. 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