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