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