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