Debits and Credits Quiz 2 Financial Accounting Quiz On Feb 28, 2026 Share Follow the Facebook page Accountants Quiz and join the group Accounting Quiz Debits and Credits Quiz 2 Multiple Choice questions 50 questions in 25 minutes Pass Score 70% 1 / 50 What happens to the Inventory account when inventory is sold? It increases It depends on the type of sale It decreases It remains unchanged The Inventory account is credited, reducing its balance as goods are sold 2 / 50 What happens to the Capital account when additional investments are made by the owner? It decreases No change It is debited It increases The Capital account is credited, increasing the owner's equity when more capital is invested. 3 / 50 If a customer returns goods, which account is debited? Sales Returns Sales Accounts Receivable Inventory Sales Returns is debited to reduce the revenue and acknowledge the return of goods. 4 / 50 Which of the following is credited when cash is received from a customer? Accounts Receivable Accounts Payable Sales Cash When cash is received from a customer, the Accounts Receivable is credited to decrease the balance as the debt has been settled. 5 / 50 When a business receives payment in advance from a customer, which account is credited? Revenue Unearned Revenue Cash Accounts Receivable Unearned Revenue is credited to record the liability until the service or product is delivered. 6 / 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. 7 / 50 When an expense is incurred but not yet paid, which account is credited? Expenses Revenue Accounts Payable Cash Accounts Payable is credited to recognize the obligation to pay the expense in the future. 8 / 50 Which account is credited when goods are sold on credit? Sales Inventory Cash Accounts Receivable Sales are credited when goods are sold, reflecting an increase in revenue. 9 / 50 When equipment is sold for cash, which account is debited? Cash Accounts Receivable Sales Equipment Cash is debited to reflect the increase in cash from the sale of equipment 10 / 50 When a company borrows money from a bank, which account is credited? Loan Payable Accounts Payable Interest Payable Cash Loan Payable is credited to recognize the liability created by borrowing funds. 11 / 50 Which of the following is true about the double-entry accounting system? Every transaction affects two or more accounts. Both (Every transaction affects two or more accounts) and (Debits must always equal credits) It only records cash transactions. 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. 12 / 50 When supplies are used up, which account is debited? Supplies Inventory Supplies Expense Cash Supplies Expense is debited to reflect the cost of supplies consumed in the business. 13 / 50 Which of the following accounts is increased by a debit? Accounts Payable Revenue Expenses Capital Expenses increase with a debit, reducing the overall equity in the business. 14 / 50 What is the normal balance of the Accounts Receivable account? Debit Credit It depends Zero Accounts Receivable normally have a debit balance, representing amounts owed to the company. 15 / 50 Which account is credited when a service is provided on credit? Accounts Receivable Unearned Revenue Service Revenue Cash Service Revenue is credited to record the income earned from providing the service. 16 / 50 What is the normal balance of the Capital account? Credit Debit It depends on the transaction Zero The Capital account typically has a credit balance, reflecting the owner’s equity in the business. 17 / 50 Which account typically has a debit balance? Expenses Accounts Payable Revenue Capital Expenses typically have a debit balance, reflecting the costs incurred by the business. 18 / 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. 19 / 50 Which of the following is debited when inventory is purchased for cash? Inventory Accounts Payable Cost of Goods Sold Cash The Inventory account is debited to increase the asset as more inventory is acquired. 20 / 50 Which account is debited when an expense is paid in cash? Capital Expense Cash Accounts Payable The Expense account is debited to record the cost, reducing equity. 21 / 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. 22 / 50 If a company purchases land, which account is debited? Expenses Land Cash Capital The Land account is debited to record the acquisition of the land as an asset 23 / 50 Which of the following transactions would increase a liability? Payment to suppliers Purchase of equipment with cash Borrowing from a bank Receiving cash from customers Borrowing increases liabilities as it represents an obligation to repay the bank 24 / 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. 25 / 50 If a company purchases equipment on credit, which account is debited? Equipment Accounts Payable Capital Cash Equipment is debited to reflect the addition of the asset to the company’s books. 26 / 50 What happens to the Accounts Payable account when it is debited? It increases No change It decreases It depends on the transaction Debiting Accounts Payable reduces the balance, indicating a payment has been made. 27 / 50 When an invoice is received for utilities, which account is debited? Prepaid Utilities Utilities Expense Accounts Payable Cash Utilities Expense is debited to record the cost of utilities incurred by the business. 28 / 50 When the owner invests additional cash in the business, which account is credited? Cash Revenue Owner's Equity Accounts Receivable Owner’s Equity is credited to reflect the increase in equity from the additional investment. 29 / 50 When a company pays rent in advance, which account is debited? Prepaid Rent Cash Rent Expense Accounts Payable Prepaid Rent is debited to record the payment made in advance for rent, which is considered an asset until used. 30 / 50 What happens to an expense account when it is debited? It decreases It is offset by a credit It increases It stays the same Debiting an expense account increases the total expense, reflecting higher costs incurred by the business. 31 / 50 When a company earns interest on its bank account, which account is credited? Interest Revenue Accounts Receivable Accounts Payable Cash Interest Revenue is credited to reflect the income earned from interest. 32 / 50 Which account is credited when a business owner withdraws cash for personal use? Cash Accounts Payable Owner's Equity Drawings Cash is credited as it decreases when the owner withdraws money. 33 / 50 Which of the following is debited when a company receives a loan? Cash Accounts Payable Interest Expense Loan Payable Cash is debited to reflect the increase in cash when a loan is received 34 / 50 Which of the following accounts is credited when a dividend is declared? Retained Earnings Cash Revenue Dividends Payable Dividends Payable is credited to record the liability created by declaring a dividend. 35 / 50 What happens to the Accounts Receivable account when a customer pays their invoice? It depends on the payment method No change It increases It decreases Accounts Receivable is credited, reducing the balance as the amount owed is paid off. 36 / 50 In a double-entry system, which side is the debit side? Right Left Top Bottom In the double-entry accounting system, the left side of an account is the debit side. 37 / 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. 38 / 50 Which account is credited when an invoice is sent to a customer for services rendered? Cash Unearned Revenue Service Revenue Accounts Receivable Service Revenue is credited to record the income earned from providing services. 39 / 50 Which of the following is true for a revenue account? It normally has a credit balance It is decreased by credits It is an asset account It is increased by debits Revenue accounts typically have a credit balance, reflecting income earned by the business. 40 / 50 Which account is debited when a business purchases inventory on account? Accounts Payable Inventory Cash Cost of Goods Sold Inventory is debited to reflect the acquisition of goods that will be sold to generate revenue 41 / 50 If a business owner withdraws cash for personal use, which account is debited? Drawing Cash Owner's Equity Accounts Payable Withdrawals for personal use reduce the owner’s equity, and the Drawing account is debited. 42 / 50 Which account is credited when office supplies are purchased on account? Office Supplies Cash Inventory Accounts Payable Accounts Payable is credited to recognize the obligation to pay for the office supplies in the future. 43 / 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. 44 / 50 What happens to the Cash account when it is debited? It increases No change It decreases It depends on the type of transaction Debiting the Cash account increases the cash balance as more cash is being added. 45 / 50 Which account is debited when a company's insurance premium is paid in advance? Insurance Expense Prepaid Insurance Cash Accounts Payable Prepaid Insurance is debited to record the payment made in advance, treated as an asset until used 46 / 50 Which of the following is debited when a company pays off a loan? Loan Payable Accounts Payable Interest Expense Cash Loan Payable is debited to reduce the liability when the loan is paid off. 47 / 50 When revenue is earned on account, which account is credited? Cash Revenue Accounts Receivable Unearned Revenue Revenue is credited to recognize the income earned by the business. 48 / 50 Which of the following accounts typically has a debit balance? Revenue Accounts Payable Drawings Capital The Drawings account usually has a debit balance as it represents withdrawals by the owner. 49 / 50 Which of the following accounts would be debited when a dividend is paid? Cash Retained Earnings Revenue Dividends Payable Dividends Payable is debited to reduce the liability when the dividend is paid out. 50 / 50 What is the effect on the capital account when it is credited? It depends on the transaction It increases No effect It decreases Crediting the capital account increases it, indicating an increase in the owner’s equity. 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