Debits and Credits Quiz 2 Financial Accounting Quiz On Mar 30, 2026 Share Debits and Credits Quiz 2 Multiple Choice questions 50 questions in 25 minutes Pass Score 70% 1 / 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. 2 / 50 Which of the following is debited when inventory is purchased for cash? Accounts Payable Cost of Goods Sold Cash Inventory The Inventory account is debited to increase the asset as more inventory is acquired. 3 / 50 Which account is credited when office supplies are purchased on account? Inventory Office Supplies Accounts Payable Cash Accounts Payable is credited to recognize the obligation to pay for the office supplies in the future. 4 / 50 If a customer returns goods, which account is debited? Accounts Receivable Sales Sales Returns Inventory Sales Returns is debited to reduce the revenue and acknowledge the return of goods. 5 / 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. 6 / 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. 7 / 50 Which of the following is debited when a company receives a loan? Loan Payable Interest Expense Accounts Payable Cash Cash is debited to reflect the increase in cash when a loan is received 8 / 50 Which of the following accounts typically has a debit balance? Capital Revenue Drawings Accounts Payable The Drawings account usually has a debit balance as it represents withdrawals by the owner. 9 / 50 What happens to the Cash account when it is debited? No change It depends on the type of transaction It decreases It increases Debiting the Cash account increases the cash balance as more cash is being added. 10 / 50 If a business owner withdraws cash for personal use, which account is debited? Drawing Owner's Equity Cash Accounts Payable Withdrawals for personal use reduce the owner’s equity, and the Drawing account is debited. 11 / 50 Which account is credited when a service is provided on credit? Cash Unearned Revenue Service Revenue Accounts Receivable Service Revenue is credited to record the income earned from providing the service. 12 / 50 In a double-entry system, which side is the debit side? Bottom Top Left Right In the double-entry accounting system, the left side of an account is the debit side. 13 / 50 Which of the following accounts is increased by a debit? Revenue Expenses Accounts Payable Capital Expenses increase with a debit, reducing the overall equity in the business. 14 / 50 When an invoice is received for utilities, which account is debited? Utilities Expense Prepaid Utilities Accounts Payable Cash Utilities Expense is debited to record the cost of utilities incurred by the business. 15 / 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 16 / 50 Which of the following accounts is credited when a dividend is declared? Cash Dividends Payable Revenue Retained Earnings Dividends Payable is credited to record the liability created by declaring a dividend. 17 / 50 What is the normal balance of the Capital account? Debit It depends on the transaction Zero Credit The Capital account typically has a credit balance, reflecting the owner’s equity in the business. 18 / 50 What happens to an expense account when it is debited? It increases It is offset by a credit It decreases It stays the same Debiting an expense account increases the total expense, reflecting higher costs incurred by the business. 19 / 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. 20 / 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. 21 / 50 Which account typically has a debit balance? Capital Accounts Payable Expenses Revenue Expenses typically have a debit balance, reflecting the costs incurred by the business. 22 / 50 Which of the following is true about the double-entry accounting system? Every transaction affects two or more accounts. It only records cash transactions. Both (Every transaction affects two or more accounts) and (Debits must always equal credits) 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. 23 / 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. 24 / 50 What happens to the Accounts Receivable account when a customer pays their invoice? It decreases It increases No change It depends on the payment method Accounts Receivable is credited, reducing the balance as the amount owed is paid off. 25 / 50 What happens to the Inventory account when inventory is sold? It remains unchanged It decreases It depends on the type of sale It increases The Inventory account is credited, reducing its balance as goods are sold 26 / 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. 27 / 50 Which of the following is credited when cash is received from a customer? Cash Sales Accounts Receivable Accounts Payable When cash is received from a customer, the Accounts Receivable is credited to decrease the balance as the debt has been settled. 28 / 50 When a company borrows money from a bank, which account is credited? Interest Payable Loan Payable Cash Accounts Payable Loan Payable is credited to recognize the liability created by borrowing funds. 29 / 50 What is the effect on the capital account when it is credited? It decreases It depends on the transaction No effect It increases Crediting the capital account increases it, indicating an increase in the owner’s equity. 30 / 50 If a company purchases equipment on credit, which account is debited? Capital Equipment Accounts Payable Cash Equipment is debited to reflect the addition of the asset to the company’s books. 31 / 50 When equipment is sold for cash, which account is debited? Sales Accounts Receivable Equipment Cash Cash is debited to reflect the increase in cash from the sale of equipment 32 / 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. 33 / 50 If a company purchases land, which account is debited? Cash Expenses Land Capital The Land account is debited to record the acquisition of the land as an asset 34 / 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. 35 / 50 Which of the following is true for a revenue account? It is decreased by credits It is an asset account It normally has a credit balance It is increased by debits Revenue accounts typically have a credit balance, reflecting income earned by the business. 36 / 50 When revenue is earned on account, which account is credited? Revenue Unearned Revenue Cash Accounts Receivable Revenue is credited to recognize the income earned by the business. 37 / 50 What happens to the Accounts Payable account when it is debited? It decreases It depends on the transaction No change It increases Debiting Accounts Payable reduces the balance, indicating a payment has been made. 38 / 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. 39 / 50 Which of the following transactions would increase a liability? Borrowing from a bank Receiving cash from customers Payment to suppliers Purchase of equipment with cash Borrowing increases liabilities as it represents an obligation to repay the bank 40 / 50 When an expense is incurred but not yet paid, which account is credited? Cash Accounts Payable Expenses Revenue Accounts Payable is credited to recognize the obligation to pay the expense in the future. 41 / 50 Which account is credited when a customer pays their outstanding balance? Sales Cash Interest Revenue Accounts Receivable Accounts Receivable is credited to decrease the balance, reflecting payment received. 42 / 50 When the owner invests additional cash in the business, which account is credited? Owner's Equity Cash Accounts Receivable Revenue Owner’s Equity is credited to reflect the increase in equity from the additional investment. 43 / 50 Which of the following is debited when a company pays off a loan? Interest Expense Loan Payable Accounts Payable Cash Loan Payable is debited to reduce the liability when the loan is paid off. 44 / 50 Which of the following accounts would be debited when a dividend is paid? Retained Earnings Revenue Cash Dividends Payable Dividends Payable is debited to reduce the liability when the dividend is paid out. 45 / 50 Which of the following accounts typically has a credit balance? Capital Inventory Expenses Cash The Capital account usually has a credit balance, representing the owner’s equity in the business. 46 / 50 Which of the following is true for a credit entry? It increases expenses It increases liabilities It decreases liabilities It increases assets A credit entry typically increases liabilities, indicating more debt or obligations. 47 / 50 What is the normal balance of the Accounts Receivable account? Credit Debit Zero It depends Accounts Receivable normally have a debit balance, representing amounts owed to the company. 48 / 50 Which account is credited when goods are sold on credit? Accounts Receivable Cash Inventory Sales Sales are credited when goods are sold, reflecting an increase in revenue. 49 / 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 50 / 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. Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback accounting debits and creditsaccounting debits and credits cheat sheetaccounting equation debits and credits
