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Debits and Credits Questions
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- Which of the following is credited when cash is received from a customer?
- A) Accounts Payable
- B) Sales
- C) Cash
- D) Accounts Receivable
- What is the normal balance of a liability account?
- A) Debit
- B) Credit
- C) Both Debit and Credit
- D) Neither
- Which of the following accounts is increased by a debit?
- A) Revenue
- B) Expenses
- C) Accounts Payable
- D) Capital
- If a business owner withdraws cash for personal use, which account is debited?
- A) Owner’s Equity
- B) Cash
- C) Drawing
- D) Accounts Payable
- In a double-entry system, which side is the debit side?
- A) Left
- B) Right
- C) Top
- D) Bottom
- Which of the following is true about the double-entry accounting system?
- A) Every transaction affects two or more accounts.
- B) It only records cash transactions.
- C) Debits must always equal credits.
- D) Both A and C
- What happens to the Cash account when it is debited?
- A) It decreases
- B) It increases
- C) No change
- D) It depends on the type of transaction
- Which account is credited when goods are sold on credit?
- A) Sales
- B) Accounts Receivable
- C) Cash
- D) Inventory
- What is the normal balance of the Accounts Receivable account?
- A) Debit
- B) Credit
- C) It depends
- D) Zero
- Which of the following transactions would increase a liability?
- A) Payment to suppliers
- B) Borrowing from a bank
- C) Receiving cash from customers
- D) Purchase of equipment with cash
- When an expense is incurred but not yet paid, which account is credited?
- A) Cash
- B) Accounts Payable
- C) Expenses
- D) Revenue
- Which of the following is true for a revenue account?
- A) It is increased by debits.
- B) It is decreased by credits.
- C) It normally has a credit balance.
- D) It is an asset account.
- What is the effect on the capital account when it is credited?
- A) It increases
- B) It decreases
- C) No effect
- D) It depends on the transaction
- Which of the following is debited when a company pays off a loan?
- A) Cash
- B) Loan Payable
- C) Interest Expense
- D) Accounts Payable
- Which account typically has a debit balance?
- A) Revenue
- B) Accounts Payable
- C) Capital
- D) Expenses
- If a company purchases equipment on credit, which account is debited?
- A) Cash
- B) Accounts Payable
- C) Equipment
- D) Capital
- What happens to the Accounts Payable account when it is debited?
- A) It increases
- B) It decreases
- C) No change
- D) It depends on the transaction
- When the owner invests additional cash in the business, which account is credited?
- A) Cash
- B) Owner’s Equity
- C) Revenue
- D) Accounts Receivable
- Which of the following is debited when inventory is purchased for cash?
- A) Inventory
- B) Cash
- C) Accounts Payable
- D) Cost of Goods Sold
- What happens to the Accounts Receivable account when a customer pays their invoice?
- A) It increases
- B) It decreases
- C) No change
- D) It depends on the payment method
- Which account is debited when an expense is paid in cash?
- A) Cash
- B) Accounts Payable
- C) Expense
- D) Capital
- When revenue is earned on account, which account is credited?
- A) Cash
- B) Accounts Receivable
- C) Revenue
- D) Unearned Revenue
- If a customer returns goods, which account is debited?
- A) Sales Returns
- B) Sales
- C) Accounts Receivable
- D) Inventory
- Which of the following accounts is credited when a dividend is declared?
- A) Dividends Payable
- B) Retained Earnings
- C) Cash
- D) Revenue
- What is the normal balance of the Capital account?
- A) Debit
- B) Credit
- C) It depends on the transaction
- D) Zero
Scroll down to see the correct answers with detailed explanations.
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Debits and Credits (Answer & Explanations)
Which of the following is credited when cash is received from a customer?
-
- A) Accounts Payable
- B) Sales
- C) Cash
- D) Accounts Receivable
- Answer: D) Accounts Receivable
- Explanation: When cash is received from a customer, the Accounts Receivable is credited to decrease the balance as the debt has been settled.
- What is the normal balance of a liability account?
- A) Debit
- B) Credit
- C) Both Debit and Credit
- D) Neither
- Answer: B) Credit
- Explanation: Liabilities normally carry a credit balance, reflecting amounts owed by the company.
- Which of the following accounts is increased by a debit?
- A) Revenue
- B) Expenses
- C) Accounts Payable
- D) Capital
- Answer: B) Expenses
- Explanation: Expenses increase with a debit, reducing the overall equity in the business.
- If a business owner withdraws cash for personal use, which account is debited?
- A) Owner’s Equity
- B) Cash
- C) Drawing
- D) Accounts Payable
- Answer: C) Drawing
- Explanation: Withdrawals for personal use reduce the owner’s equity, and the Drawing account is debited.
- In a double-entry system, which side is the debit side?
- A) Left
- B) Right
- C) Top
- D) Bottom
- Answer: A) Left
- Explanation: In the double-entry accounting system, the left side of an account is the debit side.
- Which of the following is true about the double-entry accounting system?
- A) Every transaction affects two or more accounts.
- B) It only records cash transactions.
- C) Debits must always equal credits.
- D) Both A and C
- Answer: D) Both A and C
- Explanation: The double-entry system requires that each transaction affects at least two accounts and that total debits equal total credits.
- What happens to the Cash account when it is debited?
- A) It decreases
- B) It increases
- C) No change
- D) It depends on the type of transaction
- Answer: B) It increases
- Explanation: Debiting the Cash account increases the cash balance as more cash is being added.
- Which account is credited when goods are sold on credit?
- A) Sales
- B) Accounts Receivable
- C) Cash
- D) Inventory
- Answer: A) Sales
- Explanation: Sales are credited when goods are sold, reflecting an increase in revenue.
- What is the normal balance of the Accounts Receivable account?
- A) Debit
- B) Credit
- C) It depends
- D) Zero
- Answer: A) Debit
- Explanation: Accounts Receivable normally have a debit balance, representing amounts owed to the company.
- Which of the following transactions would increase a liability?
- A) Payment to suppliers
- B) Borrowing from a bank
- C) Receiving cash from customers
- D) Purchase of equipment with cash
- Answer: B) Borrowing from a bank
- Explanation: Borrowing increases liabilities as it represents an obligation to repay the bank.
- When an expense is incurred but not yet paid, which account is credited?
- A) Cash
- B) Accounts Payable
- C) Expenses
- D) Revenue
- Answer: B) Accounts Payable
- Explanation: Accounts Payable is credited to recognize the obligation to pay the expense in the future.
- Which of the following is true for a revenue account?
- A) It is increased by debits.
- B) It is decreased by credits.
- C) It normally has a credit balance.
- D) It is an asset account.
- Answer: C) It normally has a credit balance.
- Explanation: Revenue accounts typically have a credit balance, reflecting income earned by the business.
- What is the effect on the capital account when it is credited?
- A) It increases
- B) It decreases
- C) No effect
- D) It depends on the transaction
- Answer: A) It increases
- Explanation: Crediting the capital account increases it, indicating an increase in the owner’s equity.
- Which of the following is debited when a company pays off a loan?
- A) Cash
- B) Loan Payable
- C) Interest Expense
- D) Accounts Payable
- Answer: B) Loan Payable
- Explanation: Loan Payable is debited to reduce the liability when the loan is paid off.
- Which account typically has a debit balance?
- A) Revenue
- B) Accounts Payable
- C) Capital
- D) Expenses
- Answer: D) Expenses
- Explanation: Expenses typically have a debit balance, reflecting the costs incurred by the business.
- If a company purchases equipment on credit, which account is debited?
- A) Cash
- B) Accounts Payable
- C) Equipment
- D) Capital
- Answer: C) Equipment
- Explanation: Equipment is debited to reflect the addition of the asset to the company’s books.
- What happens to the Accounts Payable account when it is debited?
- A) It increases
- B) It decreases
- C) No change
- D) It depends on the transaction
- Answer: B) It decreases
- Explanation: Debiting Accounts Payable reduces the balance, indicating a payment has been made.
- When the owner invests additional cash in the business, which account is credited?
- A) Cash
- B) Owner’s Equity
- C) Revenue
- D) Accounts Receivable
- Answer: B) Owner’s Equity
- Explanation: Owner’s Equity is credited to reflect the increase in equity from the additional investment.
- Which of the following is debited when inventory is purchased for cash?
- A) Inventory
- B) Cash
- C) Accounts Payable
- D) Cost of Goods Sold
- Answer: A) Inventory
- Explanation: The Inventory account is debited to increase the asset as more inventory is acquired.
- What happens to the Accounts Receivable account when a customer pays their invoice?
- A) It increases
- B) It decreases
- C) No change
- D) It depends on the payment method
- Answer: B) It decreases
- Explanation: Accounts Receivable is credited, reducing the balance as the amount owed is paid off.
- Which account is debited when an expense is paid in cash?
- A) Cash
- B) Accounts Payable
- C) Expense
- D) Capital
- Answer: C) Expense
- Explanation: The Expense account is debited to record the cost, reducing equity.
- When revenue is earned on account, which account is credited?
- A) Cash
- B) Accounts Receivable
- C) Revenue
- D) Unearned Revenue
- Answer: C) Revenue
- Explanation: Revenue is credited to recognize the income earned by the business.
- If a customer returns goods, which account is debited?
- A) Sales Returns
- B) Sales
- C) Accounts Receivable
- D) Inventory
- Answer: A) Sales Returns
- Explanation: Sales Returns is debited to reduce the revenue and acknowledge the return of goods.
- Which of the following accounts is credited when a dividend is declared?
- A) Dividends Payable
- B) Retained Earnings
- C) Cash
- D) Revenue
- Answer: A) Dividends Payable
- Explanation: Dividends Payable is credited to record the liability created by declaring a dividend.
- What is the normal balance of the Capital account?
- A) Debit
- B) Credit
- C) It depends on the transaction
- D) Zero
- Answer: B) Credit
- Explanation: The Capital account typically has a credit balance, reflecting the owner’s equity in the business.
