Double Entry Accounting Quiz

Journal Entries Quiz (Multiple Choice Questions with Answers)

19/06/2026 76 min read

Journal Entries Quiz – 50 Multiple Choice Questions with Answers and Detailed Explanations

📑 table of contents

  1. Question 1
  2. Question 2
  3. Question 3
  4. Question 4
  5. Question 5
  6. Question 6
  7. Question 7
  8. Question 8
  9. Question 9
  10. Question 10
  11. Question 11
  12. Question 12
  13. Question 13
  14. Question 14
  15. Question 15
  16. Question 16
  17. Question 17
  18. Question 18
  19. Question 19
  20. Question 20
  21. Question 21
  22. Question 22
  23. Question 23
  24. Question 24
  25. Question 25
  26. Question 26
  27. Question 27
  28. Question 28
  29. Question 29
  30. Question 30
  31. Question 31
  32. Question 32
  33. Question 33
  34. Question 34
  35. Question 35
  36. Question 36
  37. Question 37
  38. Question 38
  39. Question 39
  40. Question 40
  41. Question 41
  42. Question 42
  43. Question 43
  44. Question 44
  45. Question 45
  46. Question 46
  47. Question 47
  48. Question 48
  49. Question 49
  50. Question 50
  51. Part 1: Basic & Asset Transactions (Questions 1 – 15)
  52. Part 2: Revenue & Expense Transactions (Questions 16 – 30)
  53. Part 3: Adjusting & Closing Entries (Questions 31 – 40)
  54. Part 4: Advanced Inventory & Merchandising Transactions (Questions 41 – 50)

Question 1

Which of the following best describes a journal entry?

A) A summary of financial statements
B) A record of individual accounting transactions
C) A list of customer accounts
D) A bank reconciliation statement

Answer: B) A record of individual accounting transactions

Explanation:
A journal entry is the first formal record of a business transaction in the accounting system. It documents the accounts affected, the amounts debited and credited, and a brief description of the transaction. Journal entries form the foundation of the accounting cycle.

Question 2

In a journal entry, total debits must always:

A) Exceed total credits
B) Equal total credits
C) Be less than total credits
D) Equal total assets

Answer: B) Equal total credits

Explanation:
The double-entry accounting system requires every transaction to maintain the accounting equation. Therefore, the total amount debited must always equal the total amount credited.

Question 3

When cash is received from a customer for services provided, which account is debited?

A) Service Revenue
B) Accounts Receivable
C) Cash
D) Owner’s Capital

Answer: C) Cash

Explanation:
Cash is an asset account, and assets increase with debits. Since the company receives cash, the Cash account is debited while Service Revenue is credited.

Question 4

A company purchases office supplies for cash. Which account is credited?

A) Supplies
B) Cash
C) Expense
D) Accounts Payable

Answer: B) Cash

Explanation:
Cash decreases when it is used to purchase supplies. Asset decreases are recorded with credits, so Cash is credited.

Question 5

Purchasing equipment on account requires:

A) Debit Equipment; Credit Accounts Payable
B) Debit Cash; Credit Equipment
C) Debit Accounts Payable; Credit Equipment
D) Debit Expense; Credit Cash

Answer: A) Debit Equipment; Credit Accounts Payable

Explanation:
The company acquires an asset (Equipment), which increases with a debit. Since payment is deferred, Accounts Payable increases and is credited.

Question 6

Which account is normally credited when a company earns revenue?

A) Cash
B) Revenue
C) Expense
D) Accounts Receivable

Answer: B) Revenue

Explanation:
Revenue accounts have a normal credit balance. Earning revenue increases equity and is recorded with a credit.

Question 7

Paying rent in cash results in:

A) Debit Rent Expense; Credit Cash
B) Debit Cash; Credit Rent Expense
C) Debit Rent Expense; Credit Accounts Payable
D) Debit Rent Payable; Credit Expense

Answer: A) Debit Rent Expense; Credit Cash

Explanation:
Rent Expense increases and is debited. Cash decreases and is credited.

Question 8

What is the purpose of a journal entry description?

A) To balance accounts
B) To identify the transaction and provide context
C) To calculate taxes
D) To prepare financial statements

Answer: B) To identify the transaction and provide context

Explanation:
Descriptions explain the nature of the transaction and improve recordkeeping and audit trails.

Question 9

A business receives cash from a customer for future services. Which account is credited?

A) Service Revenue
B) Unearned Revenue
C) Cash
D) Accounts Receivable

Answer: B) Unearned Revenue

Explanation:
Since services have not yet been performed, the company records a liability called Unearned Revenue.

Question 10

Which journal entry records cash sales of $2,000?

A) Debit Sales; Credit Cash $2,000
B) Debit Cash $2,000; Credit Sales Revenue $2,000
C) Debit Accounts Receivable; Credit Sales Revenue $2,000
D) Debit Cash $2,000; Credit Accounts Receivable $2,000

Answer: B) Debit Cash $2,000; Credit Sales Revenue $2,000

Explanation:
Cash increases and is debited. Revenue increases and is credited.

Question 11

Which account is debited when inventory is purchased for cash?

A) Inventory
B) Cash
C) Accounts Payable
D) Revenue

Answer: A) Inventory

Explanation:
Inventory is an asset account. Asset increases are recorded as debits.

Question 12

Paying an account payable requires:

A) Debit Cash; Credit Accounts Payable
B) Debit Accounts Payable; Credit Cash
C) Debit Expense; Credit Cash
D) Debit Revenue; Credit Cash

Answer: B) Debit Accounts Payable; Credit Cash

Explanation:
Accounts Payable decreases with a debit, and Cash decreases with a credit.

Question 13

A company borrows money from a bank. Which account is credited?

A) Cash
B) Loan Payable
C) Interest Expense
D) Revenue

Answer: B) Loan Payable

Explanation:
Borrowing creates a liability. Liabilities increase with credits.

Question 14

Which account is affected when an owner invests cash into the business?

A) Revenue
B) Expense
C) Owner’s Capital
D) Accounts Receivable

Answer: C) Owner’s Capital

Explanation:
Owner contributions increase equity, which is recorded as a credit.

Question 15

Which journal entry records utility expenses paid in cash?

A) Debit Utilities Expense; Credit Cash
B) Debit Cash; Credit Utilities Expense
C) Debit Accounts Payable; Credit Utilities Expense
D) Debit Utilities Expense; Credit Revenue

Answer: A) Debit Utilities Expense; Credit Cash

Explanation:
Expenses increase with debits while Cash decreases with credits.

Question 16

What is the first step in preparing a journal entry?

A) Posting to the ledger
B) Preparing financial statements
C) Analyzing the transaction
D) Closing temporary accounts

Answer: C) Analyzing the transaction

Explanation:
Accountants must identify which accounts are affected and determine whether they increase or decrease before recording the entry.

Question 17

Accounts Receivable is increased with a:

A) Debit
B) Credit
C) Neither
D) Contra entry

Answer: A) Debit

Explanation:
Accounts Receivable is an asset account, and asset increases are debited.

Question 18

Which account is credited when a customer pays an outstanding balance?

A) Accounts Receivable
B) Revenue
C) Expense
D) Inventory

Answer: A) Accounts Receivable

Explanation:
The receivable decreases because the customer has paid.

Question 19

Depreciation expense is recorded with:

A) Debit Accumulated Depreciation
B) Credit Cash
C) Debit Depreciation Expense; Credit Accumulated Depreciation
D) Debit Equipment

Answer: C) Debit Depreciation Expense; Credit Accumulated Depreciation

Explanation:
This adjusting entry allocates the cost of an asset over its useful life.

Question 20

A company pays salaries to employees. Which account receives the debit?

A) Cash
B) Salaries Expense
C) Accounts Payable
D) Revenue

Answer: B) Salaries Expense

Explanation:
Salary payments represent an expense incurred by the company.

Questions 21–50

Question 21

Which account is credited when dividends are paid in cash?

A) Cash
B) Dividends
C) Revenue
D) Retained Earnings

Answer: A) Cash

Explanation: Cash decreases and must be credited.

Question 22

Which account is debited when prepaid insurance is purchased?

A) Insurance Expense
B) Cash
C) Prepaid Insurance
D) Revenue

Answer: C) Prepaid Insurance

Explanation: Prepaid Insurance is an asset and increases with a debit.

Question 23

What type of account is Accounts Payable?

A) Asset
B) Liability
C) Equity
D) Revenue

Answer: B) Liability

Explanation: Accounts Payable represents amounts owed to creditors.

Question 24

A company receives payment from customers on account. Cash is:

A) Credited
B) Debited
C) Closed
D) Adjusted

Answer: B) Debited

Explanation: Cash increases when customers pay.

Question 25

Which account is credited when equipment is sold for cash?

A) Equipment
B) Cash
C) Accounts Receivable
D) Expense

Answer: A) Equipment

Explanation: The asset being disposed of must be removed from the books.

Question 26

Revenue received in advance creates:

A) Asset
B) Liability
C) Expense
D) Equity Reduction

Answer: B) Liability

Explanation: The company still owes goods or services to customers.

Question 27

Which account normally has a debit balance?

A) Revenue
B) Capital
C) Expense
D) Accounts Payable

Answer: C) Expense

Explanation: Expenses increase with debits.

Question 28

When inventory is purchased on account, Accounts Payable is:

A) Debited
B) Credited
C) Closed
D) Adjusted

Answer: B) Credited

Explanation: A liability increases.

Question 29

What happens when cash is withdrawn by the owner?

A) Debit Drawings; Credit Cash
B) Debit Revenue; Credit Cash
C) Debit Cash; Credit Capital
D) Debit Expense; Credit Cash

Answer: A) Debit Drawings; Credit Cash

Explanation: Owner withdrawals reduce equity.

Question 30

Which account is credited when interest revenue is earned?

A) Interest Revenue
B) Cash
C) Accounts Receivable
D) Expense

Answer: A) Interest Revenue

Explanation: Revenue accounts increase with credits.

Question 31

Which side of a journal entry records credits?

A) Left side
B) Right side
C) Top section
D) Bottom section

Answer: B) Right side

Explanation: Credits are always entered on the right.

Question 32

An adjusting entry is made primarily to:

A) Correct errors
B) Record accruals and deferrals
C) Close accounts
D) Pay liabilities

Answer: B) Record accruals and deferrals

Explanation: Adjusting entries ensure accurate financial reporting.

Question 33

Unearned Revenue has a normal:

A) Debit balance
B) Credit balance
C) Zero balance
D) Expense balance

Answer: B) Credit balance

Explanation: It is a liability account.

Question 34

The purchase of land for cash affects:

A) One asset increase and one asset decrease
B) Asset and liability
C) Revenue and expense
D) Equity only

Answer: A)

Explanation: Land increases while Cash decreases.

Question 35

Which account is debited when supplies are used?

A) Supplies Expense
B) Supplies
C) Cash
D) Revenue

Answer: A)

Explanation: Using supplies creates an expense.

Question 36

A loan repayment reduces:

A) Assets only
B) Liabilities only
C) Liabilities and Cash
D) Revenue

Answer: C)

Explanation: Cash decreases and Loan Payable decreases.

Question 37

Which account increases owner’s equity?

A) Expense
B) Withdrawal
C) Revenue
D) Liability

Answer: C)

Explanation: Revenue increases retained earnings and equity.

Question 38

Accounts Receivable collected in cash requires:

A) Debit A/R, Credit Cash
B) Debit Cash, Credit A/R
C) Debit Revenue, Credit Cash
D) Debit Expense, Credit A/R

Answer: B)

Explanation: Cash increases and receivables decrease.

Question 39

The accounting equation must remain:

A) Flexible
B) Equal
C) Estimated
D) Optional

Answer: B)

Explanation: Every journal entry preserves the accounting equation.

Question 40

Which account is credited for salary accrued but unpaid?

A) Cash
B) Salaries Payable
C) Salaries Expense
D) Revenue

Answer: B)

Explanation: A liability is created.

Question 41

Journal entries are posted to the:

A) Income Statement
B) Ledger
C) Trial Balance
D) Bank Statement

Answer: B)

Explanation: Entries are transferred to ledger accounts.

Question 42

Which account is debited when a note receivable is received?

A) Cash
B) Notes Receivable
C) Revenue
D) Expense

Answer: B)

Explanation: Notes Receivable is an asset.

Question 43

What is the purpose of a compound journal entry?

A) To record one account only
B) To record transactions affecting multiple accounts
C) To close accounts
D) To prepare budgets

Answer: B)

Explanation: Compound entries involve more than two accounts.

Question 44

Interest expense is normally:

A) Debited
B) Credited
C) Closed immediately
D) Recorded as equity

Answer: A)

Explanation: Expenses increase with debits.

Question 45

A company pays insurance in advance. Cash is:

A) Debited
B) Credited
C) Closed
D) Adjusted

Answer: B)

Explanation: Cash decreases when payment is made.

Question 46

Which account is credited when merchandise is sold on account?

A) Accounts Receivable
B) Sales Revenue
C) Inventory
D) Cash

Answer: B)

Explanation: Revenue is recognized and credited.

Question 47

The source document for many journal entries is a:

A) Financial statement
B) Transaction document
C) Budget report
D) Trial balance

Answer: B)

Explanation: Invoices, receipts, and checks provide transaction evidence.

Question 48

Which account decreases with a debit?

A) Cash
B) Equipment
C) Revenue
D) Supplies

Answer: C)

Explanation: Revenue accounts have normal credit balances.

Question 49

What happens if debits do not equal credits?

A) Entry is valid
B) Trial balance will always balance
C) Journal entry is incorrect
D) Revenue increases

Answer: C)

Explanation: Double-entry bookkeeping requires equality.

Question 50

Why are journal entries important?

A) They provide the original record of transactions
B) They replace financial statements
C) They eliminate audits
D) They calculate taxes automatically

Answer: A)

Explanation: Journal entries create the initial accounting record, supporting accurate ledgers, trial balances, and financial statements. They ensure compliance with the double-entry accounting system and provide a complete audit trail.

Part 1: Basic & Asset Transactions (Questions 1 – 15)

Q1: Owner invests cash into the business. What is the journal entry?

  • A) Debit Cash, Credit Revenue

  • B) Debit Cash, Credit Owner’s Capital

  • C) Debit Owner’s Capital, Credit Cash

  • D) Debit Investment, Credit Cash

Correct Answer: B

Explanation: When an owner invests cash, the business receives an asset (Cash increases $\rightarrow$ Debit) and the owner’s equity increases (Owner’s Capital increases $\rightarrow$ Credit). Revenue is not recognized because no goods or services were delivered.

Q2: Purchased office equipment for $5,000 cash. What is the entry?

  • A) Debit Office Equipment $5,000, Credit Accounts Payable $5,000

  • B) Debit Office Equipment $5,000, Credit Cash $5,000

  • C) Debit Cash $5,000, Credit Office Equipment $5,000

  • D) Debit Equipment Expense $5,000, Credit Cash $5,000

Correct Answer: B

Explanation: This is an asset-for-asset transaction. One asset (Office Equipment) increases and is debited, while another asset (Cash) decreases and is credited. It is capitalized as an asset, not expensed immediately.

Q3: Purchased supplies worth $1,200 on account. What is the journal entry?

  • A) Debit Supplies $1,200, Credit Accounts Payable $1,200

  • B) Debit Supplies Expense $1,200, Credit Cash $1,200

  • C) Debit Accounts Payable $1,200, Credit Supplies $1,200

  • D) Debit Supplies $1,200, Credit Cash $1,200

Correct Answer: A

Explanation: “On account” means a liability is created. The asset Supplies increases ($\rightarrow$ Debit), and the liability Accounts Payable increases ($\rightarrow$ Credit).

Q4: Paid $800 cash to settle the account payable from the previous supplies purchase. What is the entry?

  • A) Debit Cash $800, Credit Accounts Payable $800

  • B) Debit Accounts Payable $800, Credit Cash $800

  • C) Debit Supplies Expense $800, Credit Cash $800

  • D) Debit Accounts Payable $800, Credit Supplies $800

Correct Answer: B

Explanation: Paying off a liability reduces both the liability and cash. Therefore, Accounts Payable decreases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q5: Collected $2,500 cash from a customer on account (payment for a past sale). What is the entry?

  • A) Debit Cash $2,500, Credit Accounts Receivable $2,500

  • B) Debit Cash $2,500, Credit Service Revenue $2,500

  • C) Debit Accounts Receivable $2,500, Credit Cash $2,500

  • D) Debit Cash $2,500, Credit Owner’s Capital $2,500

Correct Answer: A

Explanation: The revenue was already recorded when the sale occurred. Now, we are collecting the cash. Cash increases ($\rightarrow$ Debit) and Accounts Receivable (the right to collect) decreases ($\rightarrow$ Credit).

Q6: A company paid $3,600 for a 12-month insurance policy. What is the initial entry?

  • A) Debit Insurance Expense $3,600, Credit Cash $3,600

  • B) Debit Prepaid Insurance $3,600, Credit Cash $3,600

  • C) Debit Cash $3,600, Credit Prepaid Insurance $3,600

  • D) Debit Prepaid Insurance $3,600, Credit Accounts Payable $3,600

Correct Answer: B

Explanation: Under the accrual basis, insurance paid in advance is an asset. Thus, Prepaid Insurance increases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q7: Purchased land for $50,000, paying $10,000 cash and signing a note payable for the remaining balance. What is the compound entry?

  • A) Debit Land $50,000, Credit Cash $50,000

  • B) Debit Land $50,000, Credit Cash $10,000, Credit Notes Payable $40,000

  • C) Debit Land $50,000, Credit Notes Payable $50,000

  • D) Debit Cash $10,000, Debit Notes Payable $40,000, Credit Land $50,000

Correct Answer: B

Explanation: This is a compound journal entry. The total asset Land increases by $50,000 ($\rightarrow$ Debit). Cash decreases by $10,000 ($\rightarrow$ Credit) and the liability Notes Payable increases by $40,000 ($\rightarrow$ Credit). Total Debits = Total Credits ($50,000).

Q8: Sold an old delivery truck (original cost $15,000, accumulated depreciation $15,000) for $0 scrap value (discarded). What is the entry?

  • A) Debit Loss on Disposal $15,000, Credit Truck $15,000

  • B) Debit Accumulated Depreciation – Truck $15,000, Credit Truck $15,000

  • C) Debit Truck $15,000, Credit Accumulated Depreciation $15,000

  • D) Debit Cash $15,000, Credit Truck $15,000

Correct Answer: B

Explanation: To remove a fully depreciated asset from the books, we must reverse its accounts. Accumulated Depreciation (contra-asset, normal credit balance) is debited to close it, and the asset account Truck is credited to remove it.

Q9: Discovered that a $500 purchase of equipment was mistakenly recorded as a debit to Supplies. What is the correcting journal entry?

  • A) Debit Equipment $500, Credit Supplies $500

  • B) Debit Supplies $500, Credit Equipment $500

  • C) Debit Equipment $500, Credit Cash $500

  • D) Debit Cash $500, Credit Supplies $500

Correct Answer: A

Explanation: To correct the error, we must add the amount to the correct account (Equipment $\rightarrow$ Debit) and remove it from the incorrect account (Supplies $\rightarrow$ Credit).

Q10: A company writes off a $300 uncollectible account receivable using the Direct Write-Off Method. What is the entry?

  • A) Debit Allowance for Doubtful Accounts $300, Credit Accounts Receivable $300

  • B) Debit Bad Debt Expense $300, Credit Accounts Receivable $300

  • C) Debit Accounts Receivable $300, Credit Bad Debt Expense $300

  • D) Debit Bad Debt Expense $300, Credit Allowance for Doubtful Accounts $300

Correct Answer: B

Explanation: Under the direct write-off method, the expense is recorded directly when an account is deemed uncollectible. Bad Debt Expense increases ($\rightarrow$ Debit) and Accounts Receivable decreases ($\rightarrow$ Credit).

Q11: An owner withdraws $1,500 cash from the business for personal use. What is the entry?

  • A) Debit Owner’s Drawings $1,500, Credit Cash $1,500

  • B) Debit Salary Expense $1,500, Credit Cash $1,500

  • C) Debit Cash $1,500, Credit Owner’s Drawings $1,500

  • D) Debit Owner’s Capital $1,500, Credit Cash $1,500

Correct Answer: A

Explanation: Drawings represent temporary equity reductions for personal use. Owner’s Drawings has a normal debit balance and increases ($\rightarrow$ Debit), while Cash decreases ($\rightarrow$ Credit).

Q12: Received a bank loan of $20,000 by signing a short-term note. What is the entry?

  • A) Debit Notes Payable $20,000, Credit Cash $20,000

  • B) Debit Cash $20,000, Credit Notes Payable $20,000

  • C) Debit Cash $20,000, Credit Loan Revenue $20,000

  • D) Debit Interest Expense $20,000, Credit Notes Payable $20,000

Correct Answer: B

Explanation: The business receives an asset, so Cash increases ($\rightarrow$ Debit). Concurrently, a legal obligation is created, so the liability Notes Payable increases ($\rightarrow$ Credit).

Q13: Paid $150 cash for minor repairs to a delivery van. What is the entry?

  • A) Debit Repair Expense $150, Credit Cash $150

  • B) Debit Delivery Van (Asset) $150, Credit Cash $150

  • C) Debit Cash $150, Credit Repair Expense $150

  • D) Debit Maintenance Revenue $150, Credit Cash $150

Correct Answer: A

Explanation: Minor repairs are revenue expenditures that maintain the asset’s normal operating condition. They are expensed immediately (Repair Expense $\rightarrow$ Debit, Cash $\rightarrow$ Credit), not capitalized.

Q14: Established a petty cash fund of $200. What is the journal entry?

  • A) Debit Cash $200, Credit Petty Cash $200

  • B) Debit Petty Cash $200, Credit Cash $200

  • C) Debit Petty Cash Expense $200, Credit Cash $200

  • D) Debit Miscellaneous Expense $200, Credit Petty Cash $200

Correct Answer: B

Explanation: Setting up a petty cash fund shifts money from the general bank account to a physical fund box. Both are assets. Petty Cash increases ($\rightarrow$ Debit), and general Cash decreases ($\rightarrow$ Credit).

Q15: Borrowed $10,000 from a bank; the bank immediately deducted $500 interest in advance (discounted note). What is the entry?

  • A) Debit Cash $9,500, Debit Interest Expense (or Discount on Notes Payable) $500, Credit Notes Payable $10,000

  • B) Debit Cash $10,000, Credit Notes Payable $10,000

  • C) Debit Cash $9,500, Credit Notes Payable $9,500

  • D) Debit Notes Payable $10,000, Credit Cash $9,500, Credit Interest Revenue $500

Correct Answer: A

Explanation: The total liability signed for is $10,000 (Notes Payable $\rightarrow$ Credit). The actual cash received is $9,500 (Cash $\rightarrow$ Debit). The difference is the cost of borrowing (Interest Expense or a contra-liability Discount $\rightarrow$ Debit).

Part 2: Revenue & Expense Transactions (Questions 16 – 30)

Q16: Provided services to a customer on account for $4,000. What is the entry?

  • A) Debit Cash $4,000, Credit Service Revenue $4,000

  • B) Debit Accounts Receivable $4,000, Credit Service Revenue $4,000

  • C) Debit Service Revenue $4,000, Credit Accounts Receivable $4,000

  • D) Debit Accounts Payable $4,000, Credit Service Revenue $4,000

Correct Answer: B

Explanation: Revenue is earned at the time service is rendered under the accrual concept. Since cash wasn’t received yet, the asset Accounts Receivable increases ($\rightarrow$ Debit) and Service Revenue increases ($\rightarrow$ Credit).

Q17: Paid $1,800 cash for monthly employee salaries. What is the journal entry?

  • A) Debit Salaries Expense $1,800, Credit Cash $1,800

  • B) Debit Cash $1,800, Credit Salaries Expense $1,800

  • C) Debit Salaries Payable $1,800, Credit Cash $1,800

  • D) Debit Owner’s Capital $1,800, Credit Cash $1,800

Correct Answer: A

Explanation: Salaries are operating costs that have been consumed. Thus, Salaries Expense increases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q18: Received $3,000 cash in advance from a client for services to be performed next month. What is the entry?

  • A) Debit Cash $3,000, Credit Service Revenue $3,000

  • B) Debit Cash $3,000, Credit Unearned Revenue $3,000

  • C) Debit Unearned Revenue $3,000, Credit Cash $3,000

  • D) Debit Accounts Receivable $3,000, Credit Unearned Revenue $3,000

Correct Answer: B

Explanation: Because the work hasn’t been done yet, the cash cannot be recognized as revenue. Instead, it creates an obligation (liability) to perform work. Cash increases ($\rightarrow$ Debit) and Unearned Revenue (liability) increases ($\rightarrow$ Credit).

Q19: Received a utility bill for $350 but will pay it next month. What is the entry?

  • A) Debit Utilities Expense $350, Credit Utilities Payable $350

  • B) Debit Utilities Expense $350, Credit Cash $350

  • C) Debit Utilities Payable $350, Credit Utilities Expense $350

  • D) No entry required until paid.

Correct Answer: A

Explanation: Accrual accounting requires recording expenses when incurred, not when paid. The cost is recorded as Utilities Expense ($\rightarrow$ Debit) and the obligation to pay later is recorded as Utilities Payable ($\rightarrow$ Credit).

Q20: Paid the utility bill of $350 that was previously recorded as a payable. What is the entry?

  • A) Debit Utilities Expense $350, Credit Cash $350

  • B) Debit Utilities Payable $350, Credit Cash $350

  • C) Debit Cash $350, Credit Utilities Payable $350

  • D) Debit Utilities Expense $350, Credit Utilities Payable $350

Correct Answer: B

Explanation: Since the expense was already recognized in a previous period, we now simply reduce our liability. Utilities Payable decreases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q21: Performed $1,000 of the services that were previously paid for in advance (from Q18). What is the entry?

  • A) Debit Unearned Revenue $1,000, Credit Service Revenue $1,000

  • B) Debit Cash $1,000, Credit Service Revenue $1,000

  • C) Debit Service Revenue $1,000, Credit Unearned Revenue $1,000

  • D) Debit Unearned Revenue $1,000, Credit Cash $1,000

Correct Answer: A

Explanation: Now that the service is performed, the liability is reduced (Unearned Revenue decreases $\rightarrow$ Debit) and the revenue is officially earned (Service Revenue increases $\rightarrow$ Credit).

Q22: A business paid $600 cash for advertising that will run entirely during the current month. What is the entry?

  • A) Debit Prepaid Advertising $600, Credit Cash $600

  • B) Debit Advertising Expense $600, Credit Cash $600

  • C) Debit Cash $600, Credit Advertising Expense $600

  • D) Debit Advertising Revenue $600, Credit Cash $600

Correct Answer: B

Explanation: Because the benefit of the advertising is entirely consumed within the current fiscal month, it is debited directly to Advertising Expense rather than a prepaid asset account.

Q23: Provided services worth $5,000. The customer paid $2,000 in cash and promised to pay the rest later. What is the entry?

  • A) Debit Cash $5,000, Credit Service Revenue $5,000

  • B) Debit Cash $2,000, Debit Accounts Receivable $3,000, Credit Service Revenue $5,000

  • C) Debit Cash $2,000, Credit Service Revenue $2,000

  • D) Debit Accounts Receivable $3,000, Credit Service Revenue $3,000

Correct Answer: B

Explanation: Total revenue earned is $5,000 ($\rightarrow$ Credit). The assets received consist of $2,000 in immediate **Cash** ($\rightarrow$ Debit) and a $3,000 promise to pay (Accounts Receivable $\rightarrow$ Debit).

Q24: Paid $400 cash for telephone and internet services used during the month. What is the entry?

  • A) Debit Telephone/Internet Expense $400, Credit Cash $400

  • B) Debit Cash $400, Credit Telephone/Internet Expense $400

  • C) Debit Accounts Payable $400, Credit Cash $400

  • D) Debit Prepaid Utilities $400, Credit Cash $400

Correct Answer: A

Explanation: Regular monthly operational services that have been utilized represent an expense. Expense increases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q25: A company refunds $150 cash to a customer for unsatisfactory service. What is the entry?

  • A) Debit Service Revenue $150, Credit Cash $150

  • B) Debit Sales Returns and Allowances (or Service Contra-Revenue) $150, Credit Cash $150

  • C) Debit Cash $150, Credit Accounts Receivable $150

  • D) Debit Expense $150, Credit Cash $150

Correct Answer: B

Explanation: To track returns/dissatisfaction cleanly, companies use a contra-revenue account called Sales Returns and Allowances. It has a normal debit balance.

Q26: Received a $100 cash dividend from an investment in another company’s stock. What is the entry?

  • A) Debit Cash $100, Credit Dividend Revenue $100

  • B) Debit Cash $100, Credit Dividend Expense $100

  • C) Debit Investment $100, Credit Cash $100

  • D) Debit Dividend Receivable $100, Credit Dividend Revenue $100

Correct Answer: A

Explanation: Receiving a dividend payment increases our asset (Cash $\rightarrow$ Debit) and generates non-operating income (Dividend Revenue $\rightarrow$ Credit).

Q27: Paid $1,200 cash for interest on an outstanding bank loan. What is the journal entry?

  • A) Debit Notes Payable $1,200, Credit Cash $1,200

  • B) Debit Interest Expense $1,200, Credit Cash $1,200

  • C) Debit Cash $1,200, Credit Interest Expense $1,200

  • D) Debit Interest Payable $1,200, Credit Cash $1,200

Correct Answer: B

Explanation: Interest is the cost of using borrowed money over time. It is an expense of the period. Interest Expense increases ($\rightarrow$ Debit) and Cash decreases ($\rightarrow$ Credit).

Q28: Sold merchandise for $800 cash. Under a Perpetual Inventory System, what is the entry to record the sale only?

  • A) Debit Cash $800, Credit Sales Revenue $800

  • B) Debit Accounts Receivable $800, Credit Sales Revenue $800

  • C) Debit Cash $800, Credit Inventory $800

  • D) Debit Cost of Goods Sold $800, Credit Sales Revenue $800

Correct Answer: A

Explanation: The revenue portion of the sale requires a debit to Cash and a credit to Sales Revenue. (Note: The companion cost entry will be covered in later questions).

Q29: Earned $900 of interest on a note receivable that will be collected next year. What is the adjusting entry?

  • A) Debit Interest Receivable $900, Credit Interest Revenue $900

  • B) Debit Cash $900, Credit Interest Revenue $900

  • C) Debit Interest Revenue $900, Credit Interest Receivable $900

  • D) Debit Interest Expense $900, Credit Interest Payable $900

Correct Answer: A

Explanation: Interest has accrued (been earned) but not yet collected. We debit the asset Interest Receivable ($\rightarrow$ Debit) and recognize the earnings as Interest Revenue ($\rightarrow$ Credit).

Q30: Paid $500 cash for annual licensing fees to city authorities. What is the journal entry?

  • A) Debit Prepaid License $500, Credit Cash $500

  • B) Debit License/Taxes Expense $500, Credit Cash $500

  • C) Debit Cash $500, Credit License Expense $500

  • D) Debit Owner’s Capital $500, Credit Cash $500

Correct Answer: B

Explanation: Routine government fees or local licensing fees are recorded directly as an operating expense (License Expense $\rightarrow$ Debit, Cash $\rightarrow$ Credit).

Part 3: Adjusting & Closing Entries (Questions 31 – 40)

Q31: At year-end, a physical count shows $400 of supplies remaining. The Supplies account balance before adjustment was $1,500. What is the adjusting entry?

  • A) Debit Supplies Expense $400, Credit Supplies $400

  • B) Debit Supplies Expense $1,100, Credit Supplies $1,100

  • C) Debit Supplies $1,100, Credit Supplies Expense $1,100

  • D) Debit Supplies Expense $1,500, Credit Supplies $1,500

Correct Answer: B

Explanation: The amount of supplies used up is $1,500 – $400 = $1,100. We must reduce the asset account by $1,100 (Supplies $\rightarrow$ Credit) and recognize the cost of supplies consumed (Supplies Expense $\rightarrow$ Debit).

Q32: Record the annual depreciation expense on a building for $4,000. What is the entry?

  • A) Debit Depreciation Expense $4,000, Credit Building $4,000

  • B) Debit Depreciation Expense $4,000, Credit Accumulated Depreciation – Building $4,000

  • C) Debit Accumulated Depreciation $4,000, Credit Depreciation Expense $4,000

  • D) Debit Building $4,000, Credit Depreciation Expense $4,000

Correct Answer: B

Explanation: Depreciation expense is never credited directly to the long-term asset account. Instead, it is credited to a contra-asset account called Accumulated Depreciation to preserve the historical cost of the asset.

Q33: At December 31, accrued salaries owed to employees total $2,100. They will be paid in January. What is the adjusting entry?

  • A) Debit Salaries Expense $2,100, Credit Salaries Payable $2,100

  • B) Debit Salaries Payable $2,100, Credit Salaries Expense $2,100

  • C) Debit Salaries Expense $2,100, Credit Cash $2,100

  • D) No entry until salaries are paid.

Correct Answer: A

Explanation: To accurately match expenses to the period they helped generate revenue, we record the unrecorded expense (Salaries Expense $\rightarrow$ Debit) and set up the liability (Salaries Payable $\rightarrow$ Credit).

Q34: What is the closing entry for a Service Revenue account balance of $45,000?

  • A) Debit Income Summary $45,000, Credit Service Revenue $45,000

  • B) Debit Service Revenue $45,000, Credit Income Summary $45,000

  • C) Debit Service Revenue $45,000, Credit Owner’s Capital $45,000

  • D) Debit Cash $45,000, Credit Service Revenue $45,000

Correct Answer: B

Explanation: To close temporary accounts with normal credit balances (like Revenue), we must Debit them for their total balance to bring them to zero. The corresponding credit goes to the Income Summary account.

Q35: What is the closing entry for a Rent Expense account balance of $6,000?

  • A) Debit Income Summary $6,000, Credit Rent Expense $6,000

  • B) Debit Rent Expense $6,000, Credit Income Summary $6,000

  • C) Debit Owner’s Capital $6,000, Credit Rent Expense $6,000

  • D) Debit Rent Expense $6,000, Credit Cash $6,000

Correct Answer: A

Explanation: Expense accounts have a normal debit balance. To close them out and clear the balance for the new year, we Credit the expense account and Debit the Income Summary account.

Q36: The Income Summary account has a credit balance of $12,000 after revenue and expenses are closed. What is the entry to close Income Summary?

  • A) Debit Owner’s Capital $12,000, Credit Income Summary $12,000

  • B) Debit Income Summary $12,000, Credit Owner’s Capital $12,000

  • C) Debit Income Summary $12,000, Credit Retained Earnings $12,000

  • D) Debit Cash $12,000, Credit Income Summary $12,000

Correct Answer: B

Explanation: A credit balance in the Income Summary indicates a Net Income of $12,000. To close it, we debit Income Summary for $12,000 and credit Owner’s Capital to permanently transfer the profits to equity.

Q37: What is the entry to close an Owner’s Drawings account with a debit balance of $2,500?

  • A) Debit Owner’s Capital $2,500, Credit Owner’s Drawings $2,500

  • B) Debit Owner’s Drawings $2,500, Credit Owner’s Capital $2,500

  • C) Debit Income Summary $2,500, Credit Owner’s Drawings $2,500

  • D) Debit Owner’s Drawings $2,500, Credit Cash $2,500

Correct Answer: A

Explanation: The drawings account is a temporary account but is not an expense, so it bypasses Income Summary. It is closed directly by crediting Owner’s Drawings and debiting Owner’s Capital.

Q38: One month of a $3,600 prepaid insurance policy (from Q6) has expired. What is the adjusting entry?

  • A) Debit Insurance Expense $3,600, Credit Prepaid Insurance $3,600

  • B) Debit Insurance Expense $300, Credit Prepaid Insurance $300

  • C) Debit Prepaid Insurance $300, Credit Insurance Expense $300

  • D) Debit Insurance Expense $300, Credit Cash $300

Correct Answer: B

Explanation: Monthly expense = $3,600 / 12 months = $300. The expired portion becomes an expense (Insurance Expense $\rightarrow$ Debit), and the asset account is reduced (Prepaid Insurance $\rightarrow$ Credit).

Q39: A company received $1,200 for a 6-month contract, recorded initially as Unearned Revenue. At year-end, 2 months of services have been completed. What is the adjusting entry?

  • A) Debit Unearned Revenue $1,200, Credit Service Revenue $1,200

  • B) Debit Unearned Revenue $400, Credit Service Revenue $400

  • C) Debit Service Revenue $400, Credit Unearned Revenue $400

  • D) Debit Cash $400, Credit Service Revenue $400

Correct Answer: B

Explanation: The value of completed work per month is $1,200 / 6 = $200. For two months, it equals $400. We debit Unearned Revenue to reduce the liability by $400, and credit Service Revenue to recognize it as earned.

Q40: Income tax expense for the year is calculated to be $4,500, to be paid next April. What is the entry?

  • A) Debit Income Tax Expense $4,500, Credit Income Taxes Payable $4,500

  • B) Debit Income Tax Expense $4,500, Credit Cash $4,500

  • C) Debit Income Taxes Payable $4,500, Credit Income Tax Expense $4,500

  • D) No entry required until taxes are paid in April.

Correct Answer: A

Explanation: Under the accrual concept, corporate taxes must be matched to the income year they belong to. Income Tax Expense increases ($\rightarrow$ Debit) and Income Taxes Payable increases ($\rightarrow$ Credit).

Part 4: Advanced Inventory & Merchandising Transactions (Questions 41 – 50)

Q41: Under a Perpetual Inventory System, a firm purchases inventory worth $8,000 on credit. What is the entry?

  • A) Debit Purchases $8,000, Credit Accounts Payable $8,000

  • B) Debit Inventory $8,000, Credit Accounts Payable $8,000

  • C) Debit Inventory $8,000, Credit Cash $8,000

  • D) Debit Cost of Goods Sold $8,000, Credit Accounts Payable $8,000

Correct Answer: B

Explanation: In a Perpetual Inventory System, inventory items are put directly into the asset account when bought. Hence, we debit Inventory ($\rightarrow$ Debit) and credit Accounts Payable ($\rightarrow$ Credit).

Q42: Under a Periodic Inventory System, a firm purchases inventory worth $8,000 on credit. What is the entry?

  • A) Debit Purchases $8,000, Credit Accounts Payable $8,000

  • B) Debit Inventory $8,000, Credit Accounts Payable $8,000

  • C) Debit Cost of Goods Sold $8,000, Credit Accounts Payable $8,000

  • D) Debit Purchases $8,000, Credit Cash $8,000

Correct Answer: A

Explanation: In a Periodic Inventory System, the inventory account is not altered during the accounting period. Instead, temporary tracking accounts are used. We debit Purchases ($\rightarrow$ Debit) and credit Accounts Payable ($\rightarrow$ Credit).

Q43: A company sold inventory for $3,500 on account. The merchandise originally cost $1,800. Record the cost entry under a Perpetual Inventory System.

  • A) Debit Sales Revenue $1,800, Credit Inventory $1,800

  • B) Debit Cost of Goods Sold $1,800, Credit Inventory $1,800

  • C) Debit Inventory $1,800, Credit Cost of Goods Sold $1,800

  • D) No separate cost entry is required under perpetual.

Correct Answer: B

Explanation: The perpetual system requires an immediate updates for inventory changes. We must shift the cost from asset to expense: Cost of Goods Sold (COGS) increases ($\rightarrow$ Debit) and Inventory decreases ($\rightarrow$ Credit).

Q44: A company returns $500 worth of defective inventory purchased on account before paying for it (Perpetual System). What is the entry?

  • A) Debit Accounts Payable $500, Credit Inventory $500

  • B) Debit Accounts Payable $500, Credit Purchase Returns and Allowances $500

  • C) Debit Inventory $500, Credit Accounts Payable $500

  • D) Debit Cash $500, Credit Inventory $500

Correct Answer: A

Explanation: In a perpetual system, returns reduce the inventory directly. Our liability drops (Accounts Payable $\rightarrow$ Debit) and the asset value drops (Inventory $\rightarrow$ Credit).

Q45: A company returns $500 worth of defective inventory purchased on account before paying for it (Periodic System). What is the entry?

  • A) Debit Accounts Payable $500, Credit Inventory $500

  • B) Debit Accounts Payable $500, Credit Purchase Returns and Allowances $500

  • C) Debit Purchase Returns and Allowances $500, Credit Accounts Payable $500

  • D) Debit Inventory $500, Credit Purchase Returns $500

Correct Answer: B

Explanation: Under the periodic system, we use a dedicated tracking account instead of changing inventory directly. We debit Accounts Payable and credit Purchase Returns and Allowances (a contra-expense account).

Q46: Paid a freight charge of $250 for shipping incoming inventory purchased under FOB Shipping Point terms (Perpetual System). What is the entry?

  • A) Debit Inventory $250, Credit Cash $250

  • B) Debit Freight-In Expense $250, Credit Cash $250

  • C) Debit Freight-Out Expense $250, Credit Cash $250

  • D) Debit Accounts Payable $250, Credit Cash $250

Correct Answer: A

Explanation: FOB shipping point means the buyer pays transport. In a perpetual system, any cost incurred to get an asset ready for use is capitalized into the asset cost. Therefore, we debit Inventory.

Q47: Paid a freight charge of $200 to deliver goods sold to a customer under FOB Destination terms. What is the entry?

  • A) Debit Inventory $200, Credit Cash $200

  • B) Debit Freight-In $200, Credit Cash $200

  • C) Debit Freight-Out (or Delivery Expense) $200, Credit Cash $200

  • D) Debit Sales Revenue $200, Credit Cash $200

Correct Answer: C

Explanation: Delivery costs to customers are operating selling expenses, not asset inventory costs. This is recorded as Freight-Out or Delivery Expense ($\rightarrow$ Debit) and Cash ($\rightarrow$ Credit).

Q48: Paid an invoice of $4,000 for inventory within the 2% cash discount period (Terms: 2/10, n/30) under a Perpetual System. What is the compound entry?

  • A) Debit Accounts Payable $4,000, Credit Cash $4,000

  • B) Debit Accounts Payable $4,000, Credit Cash $3,920, Credit Inventory $80

  • C) Debit Accounts Payable $4,000, Credit Cash $3,920, Credit Purchase Discounts $80

  • D) Debit Cash $3,920, Credit Accounts Payable $3,920

Correct Answer: B

Explanation: Discount amount = $4,000 \times 2\% = $80$. Cash paid = $3,920$. In a perpetual system, the discount reduces the recorded book value of **Inventory** ($\rightarrow$ Credit), while Accounts Payable is cleared for the full $4,000$ ($\rightarrow$ Debit).

Q49: Paid an invoice of $4,000 for inventory within the 2% cash discount period (Terms: 2/10, n/30) under a Periodic System. What is the compound entry?

  • A) Debit Accounts Payable $4,000, Credit Cash $4,000

  • B) Debit Accounts Payable $4,000, Credit Cash $3,920, Credit Inventory $80

  • C) Debit Accounts Payable $4,000, Credit Cash $3,920, Credit Purchase Discounts $80

  • D) Debit Purchase Discounts $80, Debit Cash $3,920, Credit Accounts Payable $4,000

Correct Answer: C

Explanation: In a periodic system, inventory isn’t altered directly. Discounts are captured in a separate contra-account named Purchase Discounts ($\rightarrow$ Credit).

Q50: A customer paid their $2,000 invoice within a 1% cash discount window. What is the entry from the seller’s perspective?

  • A) Debit Cash $1,980, Debit Sales Discounts $20, Credit Accounts Receivable $2,000

  • B) Debit Cash $1,980, Credit Accounts Receivable $1,980

  • C) Debit Cash $2,000, Credit Accounts Receivable $2,000

  • D) Debit Cash $1,980, Credit Sales Revenue $20, Credit Accounts Receivable $2,000

Correct Answer: A

Explanation: The customer takes a $20 discount ($2,000 \times 1\%$). The seller receives $1,980 in **Cash** ($\rightarrow$ Debit). The discount is recorded in Sales Discounts (a contra-revenue account $\rightarrow$ Debit), and Accounts Receivable is cleared for $2,000$ ($\rightarrow$ Credit).

Journal Entries Quiz: Test Your Accounting Knowledge

Welcome to the ultimateJournal Entries Quiz! Whether you are an accounting student, a bookkeeper, or a seasoned CPA looking to brush up on the basics, this comprehensive quiz will test your ability to record financial transactions accurately.
This quiz covers 50 multiple-choice questions ranging from basic debit and credit rules to adjusting entries, inventory systems, payroll, and closing entries. Grab a piece of paper, write down your answers, and check the detailed explanations provided after each question to understand the “why” behind the correct entry.

Part 1: Basic Debit/Credit Rules & Simple Transactions

Q1. Which of the following accounts normally has a credit balance? A) Assets B) Expenses C) Liabilities D) DividendsAnswer: CExplanation: Liabilities, Equity, and Revenue accounts normally have credit balances. Assets, Expenses, and Dividends normally have debit balances. A helpful mnemonic is DEALER (Dividends, Expenses, Assets = Debit; Liabilities, Equity, Revenue = Credit).
Q2. A company pays $1,200 cash for this month’s rent. What is the journal entry? A) Dr Rent Expense 1,200; Cr Cash 1,200 B) Dr Prepaid Rent 1,200; Cr Cash 1,200 C) Dr Cash 1,200; Cr Rent Expense 1,200 D) Dr Rent Expense 1,200; Cr Accounts Payable 1,200Answer: AExplanation: Rent for the current month is an expense. Expenses increase with a debit. Cash is an asset that is decreasing, so it is credited.
Q3. A company purchases equipment for $5,000, paying $2,000 in cash and signing a note payable for the remainder. What is the correct journal entry? A) Dr Equipment 5,000; Cr Cash 5,000 B) Dr Equipment 5,000; Cr Cash 2,000; Cr Notes Payable 3,000 C) Dr Equipment 2,000; Dr Notes Payable 3,000; Cr Cash 5,000 D) Dr Cash 2,000; Dr Equipment 3,000; Cr Notes Payable 5,000Answer: BExplanation: Equipment (an asset) increases by the full cost ($5,000 debit). Cash (an asset) decreases by $2,000 (credit). Notes Payable (a liability) increases by the remaining $3,000 (credit).
Q4. A company provides services to a customer on account for $800. What is the journal entry? A) Dr Cash 800; Cr Service Revenue 800 B) Dr Accounts Receivable 800; Cr Service Revenue 800 C) Dr Service Revenue 800; Cr Accounts Receivable 800 D) Dr Accounts Receivable 800; Cr Unearned Revenue 800Answer: BExplanation: “On account” means cash is not received immediately, creating an Accounts Receivable (asset increase = debit). Service Revenue increases (credit) because the revenue is earned.
Q5. A company receives $500 cash from a customer who previously purchased services on account. What is the journal entry? A) Dr Cash 500; Cr Service Revenue 500 B) Dr Cash 500; Cr Accounts Receivable 500 C) Dr Accounts Receivable 500; Cr Cash 500 D) Dr Unearned Revenue 500; Cr Cash 500Answer: BExplanation: Cash (asset) increases (debit). Accounts Receivable (asset) decreases because the customer paid their debt (credit). Revenue was already recorded when the service was initially provided.
Q6. A company pays $600 cash to settle an account payable. What is the journal entry? A) Dr Accounts Payable 600; Cr Cash 600 B) Dr Cash 600; Cr Accounts Payable 600 C) Dr Accounts Payable 600; Cr Service Revenue 600 D) Dr Expense 600; Cr Cash 600Answer: AExplanation: Accounts Payable (a liability) decreases (debit). Cash (an asset) decreases (credit).
Q7. A company purchases supplies for $300 on account. What is the journal entry? A) Dr Supplies 300; Cr Cash 300 B) Dr Supplies Expense 300; Cr Accounts Payable 300 C) Dr Supplies 300; Cr Accounts Payable 300 D) Dr Accounts Payable 300; Cr Supplies 300Answer: CExplanation: Supplies (an asset) increases (debit). Buying “on account” increases Accounts Payable (liability increase = credit).

Part 2: Adjusting Entries (Deferrals & Accruals)

Q8. At the end of the month, a physical count reveals $100 of supplies remaining. The unadjusted balance in the Supplies account is $400. What is the adjusting entry? A) Dr Supplies 300; Cr Supplies Expense 300 B) Dr Supplies Expense 300; Cr Supplies 300 C) Dr Supplies Expense 400; Cr Supplies 400 D) Dr Supplies Expense 100; Cr Supplies 100Answer: BExplanation: Supplies used = $400 – $100 = $300. This amount must be expensed. Supplies Expense increases (debit) and Supplies (asset) decreases (credit).
Q9. A company pays $2,400 cash for a one-year insurance policy in advance. What is the initial journal entry? A) Dr Insurance Expense 2,400; Cr Cash 2,400 B) Dr Prepaid Insurance 2,400; Cr Cash 2,400 C) Dr Cash 2,400; Cr Prepaid Insurance 2,400 D) Dr Prepaid Insurance 2,400; Cr Insurance Expense 2,400Answer: BExplanation: Paying in advance creates an asset (Prepaid Insurance). The asset increases (debit) and Cash decreases (credit).
Q10. One month passes since the purchase of the $2,400 one-year insurance policy (from Q9). What is the adjusting entry? A) Dr Insurance Expense 200; Cr Prepaid Insurance 200 B) Dr Prepaid Insurance 200; Cr Insurance Expense 200 C) Dr Insurance Expense 2,400; Cr Prepaid Insurance 2,400 D) Dr Insurance Expense 200; Cr Cash 200Answer: AExplanation: $2,400 / 12 months = $200 per month. The expired portion becomes an expense. Insurance Expense increases (debit) and Prepaid Insurance decreases (credit).
Q11. A company receives $3,000 cash in advance for services to be performed next month. What is the initial journal entry? A) Dr Cash 3,000; Cr Service Revenue 3,000 B) Dr Cash 3,000; Cr Unearned Revenue 3,000 C) Dr Unearned Revenue 3,000; Cr Cash 3,000 D) Dr Cash 3,000; Cr Accounts Receivable 3,000Answer: BExplanation: Cash increases (debit). Because the service is not yet performed, a liability is created called Unearned Revenue (credit).
Q12. The company from Q11 completes half of the services next month. What is the adjusting entry? A) Dr Unearned Revenue 1,500; Cr Service Revenue 1,500 B) Dr Service Revenue 1,500; Cr Unearned Revenue 1,500 C) Dr Cash 1,500; Cr Service Revenue 1,500 D) Dr Unearned Revenue 3,000; Cr Service Revenue 3,000Answer: AExplanation: Half of the liability is now earned ($1,500). Unearned Revenue (liability) decreases (debit) and Service Revenue (equity) increases (credit).
Q13. Employees earned $1,500 in salaries during the last week of the year, but will not be paid until next year. What is the adjusting entry at year-end? A) Dr Salaries Expense 1,500; Cr Cash 1,500 B) Dr Salaries Payable 1,500; Cr Salaries Expense 1,500 C) Dr Salaries Expense 1,500; Cr Salaries Payable 1,500 D) Dr Cash 1,500; Cr Salaries Expense 1,500Answer: CExplanation: The expense was incurred but not paid. Salaries Expense increases (debit) and Salaries Payable (liability) increases (credit).
Q14. The company from Q13 pays the $1,500 salaries in the new year. What is the journal entry? A) Dr Salaries Expense 1,500; Cr Cash 1,500 B) Dr Salaries Payable 1,500; Cr Cash 1,500 C) Dr Cash 1,500; Cr Salaries Payable 1,500 D) Dr Salaries Payable 1,500; Cr Salaries Expense 1,500Answer: BExplanation: The liability (Salaries Payable) is settled (debit) and Cash decreases (credit). The expense was already recorded last year.
Q15. A company provides $800 of services to a client but has not yet billed them or received cash at year-end. What is the adjusting entry? A) Dr Cash 800; Cr Service Revenue 800 B) Dr Accounts Receivable 800; Cr Service Revenue 800 C) Dr Unearned Revenue 800; Cr Service Revenue 800 D) Dr Service Revenue 800; Cr Accounts Receivable 800Answer: BExplanation: Revenue is earned but not yet recorded. Accounts Receivable (asset) increases (debit) and Service Revenue increases (credit).
Q16. Equipment was purchased for $10,000 with a 5-year useful life and no salvage value. Using straight-line depreciation, what is the annual adjusting entry? A) Dr Depreciation Expense 2,000; Cr Equipment 2,000 B) Dr Depreciation Expense 2,000; Cr Accumulated Depreciation 2,000 C) Dr Accumulated Depreciation 2,000; Cr Depreciation Expense 2,000 D) Dr Equipment 2,000; Cr Depreciation Expense 2,000Answer: BExplanation: Annual depreciation = $10,000 / 5 = $2,000. Depreciation Expense increases (debit). Accumulated Depreciation (contra-asset) increases (credit); we do not credit the asset directly.
Q17. What is the normal balance of Accumulated Depreciation? A) Debit B) Credit C) Zero D) It depends on the assetAnswer: BExplanation: Accumulated Depreciation is a contra-asset account. Since assets have debit balances, contra-assets have credit balances to offset them.
Q18. A company sells old equipment for cash. The equipment cost $5,000, accumulated depreciation is $3,000, and it is sold for $2,500. What is the entry to record the sale? A) Dr Cash 2,500; Dr Accumulated Depreciation 3,000; Cr Equipment 5,000; Cr Gain on Sale 500 B) Dr Cash 2,500; Dr Accumulated Depreciation 3,000; Cr Equipment 5,000; Dr Loss on Sale 500 C) Dr Cash 2,500; Dr Loss on Sale 500; Dr Accumulated Depreciation 3,000; Cr Equipment 5,000 D) Dr Cash 2,500; Cr Equipment 2,500Answer: AExplanation: Book value = $5,000 – $3,000 = $2,000. Sold for $2,500, so there is a $500 gain. Cash increases (debit), Accumulated Depreciation is removed (debit), Equipment is removed (credit), and Gain (revenue) increases (credit).

Part 3: Inventory (Perpetual System) & Cost of Goods Sold

Q19. Under a perpetual inventory system, what entry is made when inventory is purchased on account? A) Dr Purchases 1,000; Cr Accounts Payable 1,000 B) Dr Inventory 1,000; Cr Accounts Payable 1,000 C) Dr Inventory 1,000; Cr Cash 1,000 D) Dr Cost of Goods Sold 1,000; Cr Accounts Payable 1,000Answer: BExplanation: In a perpetual system, purchases of inventory directly increase the Inventory asset account (debit) and increase Accounts Payable (credit).
Q20. A company sells inventory that cost $600 for $1,000 cash under a perpetual system. What are the journal entries? A) Dr Cash 1,000; Cr Sales Revenue 1,000 ONLY B) Dr Cost of Goods Sold 600; Cr Inventory 600 ONLY C) Dr Cash 1,000; Cr Sales Revenue 1,000 AND Dr Cost of Goods Sold 600; Cr Inventory 600 D) Dr Cash 1,000; Cr Inventory 1,000Answer: CExplanation: A perpetual system requires two entries for a sale: one to record the revenue (Dr Cash, Cr Sales Revenue) and one to record the cost of goods sold and reduce inventory (Dr COGS, Cr Inventory).
Q21. A customer returns goods previously purchased on account for $200 (selling price). The cost of the goods was $120. What is the entry to record the return of the merchandise under a perpetual system? A) Dr Sales Returns and Allowances 200; Cr Accounts Receivable 200 B) Dr Sales Returns and Allowances 200; Cr Accounts Receivable 200 AND Dr Inventory 120; Cr Cost of Goods Sold 120 C) Dr Accounts Receivable 200; Cr Sales Returns 200 D) Dr Inventory 200; Cr Cost of Goods Sold 200Answer: BExplanation: We must reverse the revenue effect (debit Sales Returns, credit A/R) and restore the inventory to the balance sheet (debit Inventory, credit COGS) for its original cost.
Q22. A company pays $150 for freight costs to ship goods to a customer. What is the journal entry? A) Dr Inventory 150; Cr Cash 150 B) Dr Freight-Out 150; Cr Cash 150 C) Dr Freight-In 150; Cr Cash 150 D) Dr Cost of Goods Sold 150; Cr Cash 150Answer: BExplanation: Freight costs incurred to deliver goods to customers are selling expenses, recorded as Freight-Out (or Delivery Expense). It increases (debit) and Cash decreases (credit).
Q23. A company purchases inventory and pays $100 for freight charges to get the goods to their warehouse. What is the journal entry? A) Dr Freight-Out 100; Cr Cash 100 B) Dr Freight-In 100; Cr Cash 100 C) Dr Inventory 100; Cr Cash 100 D) Dr Transportation Expense 100; Cr Cash 100Answer: CExplanation: Freight costs incurred toacquire inventory (Freight-In) are part of the cost of the inventory. Under a perpetual system, it directly debits the Inventory account.
Q24. A company purchases $1,000 of inventory on account with terms 2/10, n/30. Using the gross method, what is the initial purchase entry? A) Dr Inventory 980; Cr Accounts Payable 980 B) Dr Inventory 1,000; Cr Accounts Payable 1,000 C) Dr Purchases 1,000; Cr Accounts Payable 1,000 D) Dr Inventory 1,000; Cr Cash 1,000Answer: BExplanation: Under the gross method, inventory is recorded at the full invoice price ($1,000). Discounts are only recorded if payment is actually made within the discount period.
Q25. The company from Q24 pays for the inventory within the discount period. What is the payment entry? A) Dr Accounts Payable 1,000; Cr Cash 1,000 B) Dr Accounts Payable 1,000; Cr Cash 980; Cr Inventory 20 C) Dr Accounts Payable 1,000; Cr Cash 980; Cr Purchase Discounts 20 D) Dr Accounts Payable 980; Cr Cash 980Answer: BExplanation: The liability ($1,000) is removed (debit). Cash paid is net of the 2% discount ($980, credit). The discount reduces the cost of Inventory (credit).
Q26. A company sells $2,000 of goods on account with terms 1/10, n/30. The customer pays within the discount period. What is the cash collection entry? A) Dr Cash 2,000; Cr Accounts Receivable 2,000 B) Dr Cash 1,980; Dr Sales Discounts 20; Cr Accounts Receivable 2,000 C) Dr Cash 1,980; Cr Accounts Receivable 1,980 D) Dr Cash 1,980; Dr Cash Discount 20; Cr Accounts Receivable 2,000Answer: BExplanation: Cash received is $1,980 (debit). The discount allowed to the customer is a contra-revenue account called Sales Discounts (debit). Accounts Receivable is cleared for the full amount (credit).

Part 4: Bad Debts, Payroll, and Long-Term Assets

Q27. Using the allowance method, what is the adjusting entry to record estimated bad debts at the end of the period? A) Dr Bad Debt Expense; Cr Accounts Receivable B) Dr Bad Debt Expense; Cr Allowance for Doubtful Accounts C) Dr Allowance for Doubtful Accounts; Cr Bad Debt Expense D) Dr Bad Debt Expense; Cr CashAnswer: BExplanation: Bad Debt Expense increases (debit). We credit Allowance for Doubtful Accounts (a contra-asset) rather than Accounts Receivable directly because we don’t know exactly which specific customers will default.
Q28. Under the allowance method, a specific customer’s account of $500 is deemed uncollectible and written off. What is the journal entry? A) Dr Bad Debt Expense 500; Cr Accounts Receivable 500 B) Dr Allowance for Doubtful Accounts 500; Cr Accounts Receivable 500 C) Dr Bad Debt Expense 500; Cr Allowance for Doubtful Accounts 500 D) Dr Loss on Write-off 500; Cr Accounts Receivable 500Answer: BExplanation: The write-off reduces both Accounts Receivable (credit) and the Allowance for Doubtful Accounts (debit). It does not affect the income statement because the expense was already estimated and recorded previously.
Q29. A customer whose account was previously written off (from Q28) unexpectedly pays the $500. What is the entry to reinstate the account? A) Dr Cash 500; Cr Bad Debt Expense 500 B) Dr Accounts Receivable 500; Cr Allowance for Doubtful Accounts 500 C) Dr Allowance for Doubtful Accounts 500; Cr Accounts Receivable 500 D) Dr Cash 500; Cr Accounts Receivable 500Answer: BExplanation: To reinstate, we reverse the write-off entry. Debit Accounts Receivable and credit Allowance for Doubtful Accounts. (A second entry would then be Dr Cash, Cr A/R to record the collection).
Q30. A company establishes a petty cash fund of $200. What is the journal entry? A) Dr Petty Cash 200; Cr Cash 200 B) Dr Cash 200; Cr Petty Cash 200 C) Dr Petty Cash Expense 200; Cr Cash 200 D) Dr Various Expenses 200; Cr Cash 200Answer: AExplanation: Establishing the fund transfers cash from the main account to the petty cash box. Petty Cash (asset) increases (debit) and Cash (asset) decreases (credit).
Q31. The petty cash fund (from Q30) is replenished. It contains $40 in cash and $160 in receipts for postage and supplies. What is the entry to replenish? A) Dr Postage Expense, Dr Supplies; Cr Cash 160 B) Dr Postage Expense, Dr Supplies; Cr Petty Cash 160 C) Dr Cash 160; Cr Postage Expense, Cr Supplies 160 D) No entry is made until the fund is increased.Answer: AExplanation: Replenishing involves recognizing the expenses incurred (debits to respective expense accounts) and crediting Cash for the amount needed to bring the petty cash box back to its original $200 balance. The Petty Cash account itself is not credited unless the fund size is reduced.
Q32. A company declares a cash dividend of $5,000. What is the journal entry on the date of declaration? A) Dr Cash Dividend 5,000; Cr Cash 5,000 B) Dr Retained Earnings (or Dividends) 5,000; Cr Dividends Payable 5,000 C) Dr Dividends Payable 5,000; Cr Cash 5,000 D) Dr Cash 5,000; Cr Dividend Revenue 5,000Answer: BExplanation: On the declaration date, a liability is created. Retained Earnings (or a temporary Dividends account) decreases (debit) and Dividends Payable (liability) increases (credit).
Q33. The company from Q32 pays the declared dividend. What is the journal entry on the date of payment? A) Dr Dividends Payable 5,000; Cr Cash 5,000 B) Dr Dividends Expense 5,000; Cr Cash 5,000 C) Dr Retained Earnings 5,000; Cr Cash 5,000 D) Dr Cash 5,000; Cr Dividends Payable 5,000Answer: AExplanation: The liability (Dividends Payable) is settled (debit) and Cash decreases (credit).
Q34. A company issued a 60-day, 6%, $10,000 note payable to the bank. What is the entry to record the issuance? A) Dr Cash 10,000; Cr Notes Payable 10,000 B) Dr Cash 10,200; Cr Notes Payable 10,200 C) Dr Notes Payable 10,000; Cr Cash 10,000 D) Dr Interest Expense 200; Dr Cash 10,000; Cr Notes Payable 10,200Answer: AExplanation: The principal amount of the note is recorded. Cash increases (debit) and Notes Payable (liability) increases (credit). Interest is accrued over time, not at issuance.
Q35. The company from Q34 accrues interest at the end of the accounting period (30 days have passed). What is the adjusting entry? (Use a 360-day year) A) Dr Interest Expense 50; Cr Cash 50 B) Dr Interest Expense 50; Cr Interest Payable 50 C) Dr Interest Payable 50; Cr Interest Expense 50 D) No entry is needed until the note matures.Answer: BExplanation: Interest = $10,000 * 6% * (30/360) = $50. The expense is recognized (debit) and a liability for the unpaid interest is created (credit).
Q36. A company purchases a patent for $50,000 cash. What is the journal entry? A) Dr Patent Expense 50,000; Cr Cash 50,000 B) Dr Intangible Asset – Patent 50,000; Cr Cash 50,000 C) Dr Goodwill 50,000; Cr Cash 50,000 D) Dr Research & Development 50,000; Cr Cash 50,000Answer: BExplanation: A purchased patent is an intangible asset. The asset account increases (debit) and Cash decreases (credit). It is capitalized, not expensed immediately.
Q37. A company amortizes its patent (from Q36) over its 10-year legal life. What is the annual adjusting entry? A) Dr Amortization Expense 5,000; Cr Patent 5,000 B) Dr Amortization Expense 5,000; Cr Accumulated Amortization 5,000 C) Dr Patent Expense 5,000; Cr Accumulated Amortization 5,000 D) Dr Depreciation Expense 5,000; Cr Patent 5,000Answer: BExplanation: Amortization of intangible assets is recorded similarly to depreciation. Amortization Expense increases (debit) and Accumulated Amortization (contra-asset) increases (credit).

Part 5: Equity Issuance & Stock Dividends

Q38. A company issues 1,000 shares of $10 par value common stock for $15 per share in cash. What is the journal entry? A) Dr Cash 15,000; Cr Common Stock 15,000 B) Dr Cash 15,000; Cr Common Stock 10,000; Cr Additional Paid-In Capital 5,000 C) Dr Cash 10,000; Dr Additional Paid-In Capital 5,000; Cr Common Stock 15,000 D) Dr Cash 15,000; Cr Common Stock 10,000; Cr Retained Earnings 5,000Answer: BExplanation: Cash received is $15,000 (debit). Common Stock is credited for the par value (1,000 * $10 = $10,000). The excess over par ($5,000) is credited to Additional Paid-In Capital.
Q39. A company issues 500 shares of no-par common stock with a stated value of $5 for $12 per share. What is the journal entry? A) Dr Cash 6,000; Cr Common Stock 6,000 B) Dr Cash 6,000; Cr Common Stock 2,500; Cr Additional Paid-In Capital 3,500 C) Dr Cash 6,000; Cr Common Stock 3,500; Cr Additional Paid-In Capital 2,500 D) Dr Cash 6,000; Cr Common Stock 2,500; Cr Retained Earnings 3,500Answer: BExplanation: Cash received = 500 * $12 = $6,000 (debit). Common Stock is credited for the stated value (500 * $5 = $2,500). The excess ($3,500) goes to Additional Paid-In Capital (credit).
Q40. A company declares a 10% stock dividend. There are 10,000 shares outstanding, par value $10, market value $15. What is the entry on the declaration date? A) Dr Retained Earnings 15,000; Cr Stock Dividends Distributable 10,000; Cr Additional Paid-In Capital 5,000 B) Dr Retained Earnings 10,000; Cr Stock Dividends Distributable 10,000 C) Dr Stock Dividends 15,000; Cr Common Stock 15,000 D) Dr Retained Earnings 15,000; Cr Common Stock 15,000Answer: AExplanation: For a small stock dividend (<20-25%), it is recorded at market value. Total value = 1,000 shares (10% of 10k) * $15 = $15,000 (debit to Retained Earnings). Par value (1,000 * $10 = $10,000) is credited to Stock Dividends Distributable, and the excess ($5,000) to APIC.

Part 6: Closing Entries & Error Corrections

Q41. At the end of the year, a company has $50,000 in Service Revenue. What is the closing entry for this account? A) Dr Service Revenue 50,000; Cr Income Summary 50,000 B) Dr Income Summary 50,000; Cr Service Revenue 50,000 C) Dr Service Revenue 50,000; Cr Retained Earnings 50,000 D) Dr Retained Earnings 50,000; Cr Service Revenue 50,000Answer: AExplanation: Revenue accounts have credit balances. To close them, we must debit the revenue account and credit Income Summary for the same amount.
Q42. A company has $30,000 in Salaries Expense and $10,000 in Rent Expense. What is the closing entry for these expenses? A) Dr Salaries Expense 30,000; Dr Rent Expense 10,000; Cr Income Summary 40,000 B) Dr Income Summary 40,000; Cr Salaries Expense 30,000; Cr Rent Expense 10,000 C) Dr Income Summary 40,000; Cr Retained Earnings 40,000 D) Dr Retained Earnings 40,000; Cr Salaries Expense 30,000; Cr Rent Expense 10,000Answer: BExplanation: Expense accounts have debit balances. To close them, we credit the expense accounts to bring them to zero, and debit Income Summary for the total.
Q43. After closing revenues and expenses, the Income Summary account has a credit balance of $20,000. What is the entry to close Income Summary? A) Dr Income Summary 20,000; Cr Retained Earnings 20,000 B) Dr Retained Earnings 20,000; Cr Income Summary 20,000 C) Dr Income Summary 20,000; Cr Cash 20,000 D) Dr Cash 20,000; Cr Income Summary 20,000Answer: AExplanation: A credit balance in Income Summary indicates Net Income. To close it, we debit Income Summary (bringing it to zero) and credit Retained Earnings to transfer the net income.
Q44. A company has a Dividends account with a debit balance of $5,000 at year-end. What is the closing entry? A) Dr Income Summary 5,000; Cr Dividends 5,000 B) Dr Dividends 5,000; Cr Retained Earnings 5,000 C) Dr Retained Earnings 5,000; Cr Dividends 5,000 D) Dr Retained Earnings 5,000; Cr Income Summary 5,000Answer: CExplanation: Dividends is a contra-equity account with a debit balance. It is closed directly to Retained Earnings (not Income Summary) by crediting Dividends and debiting Retained Earnings.
Q45. Which of the following accounts will appear on a Post-Closing Trial Balance? A) Service Revenue B) Salaries Expense C) Accounts Receivable D) DividendsAnswer: CExplanation: The post-closing trial balance only contains permanent (balance sheet) accounts. Accounts Receivable is an asset. Revenues, Expenses, and Dividends are temporary accounts that have been closed.
Q46. A company discovers it debited Equipment for $1,000 instead of Supplies (which was purchased for cash). What is the correcting entry? A) Dr Supplies 1,000; Cr Equipment 1,000 B) Dr Equipment 1,000; Cr Supplies 1,000 C) Dr Supplies 1,000; Cr Cash 1,000 D) Dr Supplies 1,000; Cr Accounts Payable 1,000Answer: AExplanation: The original entry incorrectly increased Equipment. To correct it, we must decrease Equipment (credit) and increase Supplies (debit) for the same amount. Cash is not involved in the correction.
Q47. A company purchased $500 of supplies for cash, but debited Supplies Expense for $50 instead of $500. What is the correcting entry? A) Dr Supplies Expense 450; Cr Cash 450 B) Dr Supplies 450; Cr Supplies Expense 450 C) Dr Supplies Expense 500; Cr Cash 500 D) Dr Supplies 500; Cr Supplies Expense 500Answer: AExplanation: The correct entry should have been Dr Supplies Exp 500, Cr Cash 500. The incorrect entry was Dr Supplies Exp 50, Cr Cash 50. To fix it, we need to add the missing $450 to the expense and cash. Thus, debit Supplies Expense 450 and credit Cash 450.

Part 7: Bank Reconciliation & Miscellaneous Entries

Q48. A company receives a bank statement showing a $30 bank service charge. What is the journal entry to record this? A) Dr Cash 30; Cr Bank Expense 30 B) Dr Miscellaneous Expense (or Bank Service Charge) 30; Cr Cash 30 C) Dr Accounts Receivable 30; Cr Cash 30 D) No entry is needed; it’s already on the bank statement.Answer: BExplanation: Bank service charges are an expense to the company. The expense increases (debit) and the company’s Cash balance decreases (credit).
Q49. A customer’s check for $200 is returned by the bank marked “NSF” (Non-Sufficient Funds). What is the journal entry? A) Dr Cash 200; Cr Accounts Receivable 200 B) Dr Accounts Receivable 200; Cr Cash 200 C) Dr NSF Expense 200; Cr Cash 200 D) Dr Bad Debt Expense 200; Cr Accounts Receivable 200Answer: BExplanation: The company initially debited Cash and credited A/R when the check was received. Since the check bounced, Cash must be reduced (credit) and the customer’s debt is reinstated (debit to A/R).
Q50. A company pays the principal and interest on a note payable at maturity. The principal is $10,000 and total interest is $300 (of which $100 was previously accrued). What is the entry? A) Dr Notes Payable 10,000; Dr Interest Expense 300; Cr Cash 10,300 B) Dr Notes Payable 10,000; Dr Interest Payable 100; Dr Interest Expense 200; Cr Cash 10,300 C) Dr Notes Payable 10,000; Dr Interest Expense 200; Cr Cash 10,200 D) Dr Notes Payable 10,300; Cr Cash 10,300Answer: BExplanation: The liability for principal ($10,000) is removed (debit). The previously accrued interest liability ($100) is removed (debit to Interest Payable). The remaining interest incurred since the last adjustment ($200) is expensed (debit to Interest Expense). Cash paid is the total ($10,300, credit).

 

 

 

 

Journal Entries Quiz

Instructions: Test your knowledge of journal entries in double-entry accounting. Choose the best answer for each question.

1. What is the fundamental rule of double-entry bookkeeping? A) Every transaction affects only one account B) Total debits must equal total credits in every journal entry C) Assets are always credited D) Liabilities are always debited

Correct Answer: B Explanation: The core principle of double-entry accounting is that every financial transaction has equal and opposite effects in at least two accounts. Total debits must always equal total credits. This maintains the accounting equation (Assets = Liabilities + Equity) and ensures the trial balance balances.

2. Which account is increased with a debit? A) Revenue B) Liability C) Owner’s Capital D) Expense

Correct Answer: D Explanation: Expenses are increased by debits (and decreased by credits). Assets and expenses follow the “debit increases” rule, while liabilities, equity, and revenues follow the “credit increases” rule. This is essential for proper journal entries.

3. When a business purchases equipment on credit, the journal entry is: A) Debit Equipment, Credit Cash B) Debit Equipment, Credit Accounts Payable C) Debit Accounts Payable, Credit Equipment D) Debit Cash, Credit Equipment

Correct Answer: B Explanation: Acquiring an asset (Equipment) increases it with a debit. Since payment is on credit, a liability (Accounts Payable) increases with a credit. This reflects the economic reality of the transaction accurately.

4. Cash is received from a customer for services to be performed next month. How should this be recorded? A) Debit Cash, Credit Service Revenue B) Debit Cash, Credit Unearned Revenue C) Debit Unearned Revenue, Credit Cash D) Debit Service Revenue, Credit Cash

Correct Answer: B Explanation: This is unearned (deferred) revenue. Cash (asset) increases with a debit, and a liability (Unearned Revenue) increases with a credit until the service is performed.

5. Which of the following is a correct journal entry for paying rent in cash? A) Debit Rent Expense, Credit Cash B) Debit Cash, Credit Rent Expense C) Debit Prepaid Rent, Credit Cash D) Debit Rent Payable, Credit Cash

Correct Answer: A Explanation: Rent paid for the current period is an expense. Debiting the expense account increases expenses (reducing equity), and crediting Cash decreases the asset.

6. A company sells goods on account for $5,000 (cost $3,000). What is the revenue-side journal entry? A) Debit Sales Revenue $5,000, Credit Accounts Receivable $5,000 B) Debit Accounts Receivable $5,000, Credit Sales Revenue $5,000 C) Debit Cash $5,000, Credit Sales Revenue $5,000 D) Debit Sales Revenue $5,000, Credit Cash $5,000

Correct Answer: B Explanation: Selling on credit increases Accounts Receivable (asset) with a debit and recognizes revenue with a credit. A separate entry is needed for the cost of goods sold.

7. Recording an expense that has been incurred but not yet paid is called: A) Accrued expense B) Prepaid expense C) Deferred revenue D) Unearned expense

Correct Answer: A Explanation: Accrued expenses (e.g., salaries payable) require an adjusting entry: Debit Expense, Credit Payable. This follows the accrual basis of accounting.

8. What is the correct entry to record depreciation on equipment? A) Debit Accumulated Depreciation, Credit Depreciation Expense B) Debit Depreciation Expense, Credit Accumulated Depreciation C) Debit Equipment, Credit Depreciation Expense D) Debit Cash, Credit Depreciation Expense

Correct Answer: B Explanation: Depreciation Expense is debited (increases expenses), and Accumulated Depreciation (contra-asset) is credited (increases the contra account, reducing net book value of the asset).

9. Owner withdraws $2,000 cash for personal use. The journal entry is: A) Debit Owner’s Capital, Credit Cash B) Debit Drawings (or Owner’s Withdrawal), Credit Cash C) Debit Cash, Credit Drawings D) Debit Expense, Credit Cash

Correct Answer: B Explanation: Withdrawals reduce owner’s equity. Using a Drawings account (temporary contra-equity) keeps it separate from business expenses until closing entries.

10. Which account is decreased by a credit? A) Accounts Payable B) Service Revenue C) Prepaid Insurance D) Notes Payable

Correct Answer: C Explanation: Prepaid Insurance is an asset. Assets decrease with credits. The other options are increased by credits.

11. Which of the following errors would cause the trial balance to be out of balance? A) Posting a debit as a credit B) Omitting a transaction entirely C) Recording the correct amount in the wrong account D) Recording a debit twice in the same account

Correct Answer: A Explanation: Only errors that cause unequal debits and credits will make the trial balance unequal. Other errors may still balance but be incorrect.

12. Which of the following is an example of an internal transaction? A) Cash sale to customer B) Depreciation of equipment C) Purchase of supplies on credit D) Payment of salaries

Correct Answer: B Explanation: Depreciation is an internal adjusting entry with no external party involved at the time of recording. It allocates the cost of a long-term asset over its useful life.

Journal Entries Quiz – Accounting Quiz
This quiz is designed to test your understanding of journal entries in accounting. It includes 50 multiple-choice questions, each with a detailed explanation of the correct answer.
Instructions
Read each question carefully and choose the best answer. After selecting your answer, review the explanation to deepen your understanding of the accounting principles involved.
Question 1
A business purchases office supplies on credit for $500. Which of the following is the correct journal entry?
A) Debit Office Supplies $500, Credit Cash $500
B) Debit Accounts Payable $500, Credit Office Supplies $500
C) Debit Office Supplies $500, Credit Accounts Payable $500
D) Debit Cash $500, Credit Office Supplies $500
Correct Answer: C
Explanation: When a business purchases office supplies on credit, it increases an asset (Office Supplies) and increases a liability (Accounts Payable). Assets increase with a debit, and liabilities increase with a credit.
Question 2
An owner invests $10,000 cash into the business. What is the correct journal entry?
A) Debit Cash $10,000, Credit Owner’s Capital $10,000
B) Debit Owner’s Capital $10,000, Credit Cash $10,000
C) Debit Cash $10,000, Credit Revenue $10,000
D) Debit Owner’s Capital $10,000, Credit Drawings $10,000
Correct Answer: A
Explanation: When an owner invests cash, the business’s cash (an asset) increases, and the owner’s equity (Owner’s Capital) increases. Assets increase with a debit, and owner’s equity increases with a credit.
Question 3
The business pays $1,200 for one month’s rent in advance. What is the correct journal entry?
A) Debit Rent Expense $1,200, Credit Cash $1,200
B) Debit Prepaid Rent $1,200, Credit Cash $1,200
C) Debit Cash $1,200, Credit Prepaid Rent $1,200
D) Debit Rent Expense $1,200, Credit Accounts Payable $1,200
Correct Answer: B
Explanation: Paying rent in advance creates an asset called Prepaid Rent. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.
Question 4
A company provides services to a client for $2,500 on credit. Which journal entry is correct?
A) Debit Cash $2,500, Credit Service Revenue $2,500
B) Debit Accounts Receivable $2,500, Credit Service Revenue $2,500
C) Debit Service Revenue $2,500, Credit Accounts Receivable $2,500
D) Debit Accounts Payable $2,500, Credit Service Revenue $2,500
Correct Answer: B
Explanation: When services are provided on credit, the company earns revenue and gains a right to collect cash in the future (Accounts Receivable). Assets increase with a debit, and revenues increase with a credit.
Question 5
The business receives $800 cash for services previously billed on credit. What is the correct journal entry?
A) Debit Cash $800, Credit Accounts Receivable $800
B) Debit Accounts Receivable $800, Credit Cash $800
C) Debit Cash $800, Credit Service Revenue $800
D) Debit Service Revenue $800, Credit Cash $800
Correct Answer: A
Explanation: Receiving cash for services previously billed means cash (an asset) increases, and the claim against the customer (Accounts Receivable) decreases.

Journal Entries Quiz – Accounting Quiz
Questions 1-10
1. A business purchases office supplies on credit for $500. Which of the following is the correct journal entry?
A) Debit Office Supplies $500, Credit Cash $500
B) Debit Accounts Payable $500, Credit Office Supplies $500
C) Debit Office Supplies $500, Credit Accounts Payable $500
D) Debit Cash $500, Credit Office Supplies $500
Correct Answer: C
Explanation: Purchasing on credit increases an asset (Office Supplies) and a liability (Accounts Payable). Assets increase with a debit; liabilities increase with a credit.
2. An owner invests $10,000 cash into the business. What is the correct journal entry?
A) Debit Cash $10,000, Credit Owner’s Capital $10,000
B) Debit Owner’s Capital $10,000, Credit Cash $10,000
C) Debit Cash $10,000, Credit Revenue $10,000
D) Debit Owner’s Capital $10,000, Credit Drawings $10,000
Correct Answer: A
Explanation: Cash (asset) increases with a debit, and Owner’s Capital (equity) increases with a credit.
3. The business pays $1,200 for one month’s rent in advance. What is the correct journal entry?
A) Debit Rent Expense $1,200, Credit Cash $1,200
B) Debit Prepaid Rent $1,200, Credit Cash $1,200
C) Debit Cash $1,200, Credit Prepaid Rent $1,200
D) Debit Rent Expense $1,200, Credit Accounts Payable $1,200
Correct Answer: B
Explanation: Prepaid Rent is an asset that increases with a debit. Cash decreases with a credit.
4. A company provides services to a client for $2,500 on credit. Which journal entry is correct?
A) Debit Cash $2,500, Credit Service Revenue $2,500
B) Debit Accounts Receivable $2,500, Credit Service Revenue $2,500
C) Debit Service Revenue $2,500, Credit Accounts Receivable $2,500
D) Debit Accounts Payable $2,500, Credit Service Revenue $2,500
Correct Answer: B
Explanation: Revenue is earned (credit) and a claim against the customer (Accounts Receivable, an asset) is created (debit).
5. The business receives $800 cash for services previously billed on credit. What is the correct journal entry?
A) Debit Cash $800, Credit Accounts Receivable $800
B) Debit Accounts Receivable $800, Credit Cash $800
C) Debit Cash $800, Credit Service Revenue $800
D) Debit Service Revenue $800, Credit Cash $800
Correct Answer: A
Explanation: Cash increases (debit) and the receivable asset decreases (credit).
6. The company pays its employees salaries of $3,000. What is the correct journal entry?
A) Debit Cash $3,000, Credit Salaries Expense $3,000
B) Debit Salaries Expense $3,000, Credit Cash $3,000
C) Debit Salaries Payable $3,000, Credit Cash $3,000
D) Debit Salaries Expense $3,000, Credit Salaries Payable $3,000
Correct Answer: B
Explanation: Salaries Expense increases with a debit, and Cash decreases with a credit.
7. A business borrows $20,000 from a bank by signing a note payable. What is the correct journal entry?
A) Debit Cash $20,000, Credit Notes Payable $20,000
B) Debit Notes Payable $20,000, Credit Cash $20,000
C) Debit Cash $20,000, Credit Loan Revenue $20,000
D) Debit Loan Expense $20,000, Credit Cash $20,000
Correct Answer: A
Explanation: Cash (asset) increases and Notes Payable (liability) increases.
8. The company pays $300 for advertising expenses. Which journal entry is correct?
A) Debit Cash $300, Credit Advertising Expense $300
B) Debit Advertising Expense $300, Credit Cash $300
C) Debit Accounts Payable $300, Credit Advertising Expense $300
D) Debit Advertising Expense $300, Credit Accounts Payable $300
Correct Answer: B
Explanation: Expenses increase with a debit; cash decreases with a credit.
9. An owner withdraws $1,500 cash from the business for personal use. What is the correct journal entry?
A) Debit Cash $1,500, Credit Owner’s Capital $1,500
B) Debit Owner’s Capital $1,500, Credit Cash $1,500
C) Debit Drawings $1,500, Credit Cash $1,500
D) Debit Cash $1,500, Credit Drawings $1,500
Correct Answer: C
Explanation: Drawings (contra-equity) increase with a debit, reducing equity. Cash decreases with a credit.
10. The business purchases equipment for $7,000 cash. Which journal entry is correct?
A) Debit Equipment $7,000, Credit Cash $7,000
B) Debit Cash $7,000, Credit Equipment $7,000
C) Debit Equipment $7,000, Credit Accounts Payable $7,000
D) Debit Accounts Payable $7,000, Credit Equipment $7,000
Correct Answer: A
Explanation: One asset (Equipment) increases while another (Cash) decreases.

Journal Entries Quiz – Accounting Quiz

Journal Entries Quiz – Part 1

Here are the first 25 multiple-choice questions on Journal Entries, along with their correct answers and detailed explanations.

## Question 1

A business purchases office supplies on credit for $500. Which of the following is the correct journal entry?

A) Debit Office Supplies $500, Credit Cash $500
B) Debit Accounts Payable $500, Credit Office Supplies $500
C) Debit Office Supplies $500, Credit Accounts Payable $500
D) Debit Cash $500, Credit Office Supplies $500

**Correct Answer: C**

**Explanation:** When a business purchases office supplies on credit, it increases an asset (Office Supplies) and increases a liability (Accounts Payable). Assets increase with a debit, and liabilities increase with a credit.

## Question 2

An owner invests $10,000 cash into the business. What is the correct journal entry?

A) Debit Cash $10,000, Credit Owner’s Capital $10,000
B) Debit Owner’s Capital $10,000, Credit Cash $10,000
C) Debit Cash $10,000, Credit Revenue $10,000
D) Debit Owner’s Capital $10,000, Credit Drawings $10,000

**Correct Answer: A**

**Explanation:** When an owner invests cash, the business’s cash (an asset) increases, and the owner’s equity (Owner’s Capital) increases. Assets increase with a debit, and owner’s equity increases with a credit.

## Question 3

The business pays $1,200 for one month’s rent in advance. What is the correct journal entry?

A) Debit Rent Expense $1,200, Credit Cash $1,200
B) Debit Prepaid Rent $1,200, Credit Cash $1,200
C) Debit Cash $1,200, Credit Prepaid Rent $1,200
D) Debit Rent Expense $1,200, Credit Accounts Payable $1,200

**Correct Answer: B**

**Explanation:** Paying rent in advance creates an asset called Prepaid Rent, as the business has a right to use the property in the future. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 4

A company provides services to a client for $2,500 on credit. Which journal entry is correct?

A) Debit Cash $2,500, Credit Service Revenue $2,500
B) Debit Accounts Receivable $2,500, Credit Service Revenue $2,500
C) Debit Service Revenue $2,500, Credit Accounts Receivable $2,500
D) Debit Accounts Payable $2,500, Credit Service Revenue $2,500

**Correct Answer: B**

**Explanation:** When services are provided on credit, the company earns revenue, and it gains a right to collect cash from the client in the future, which is an asset called Accounts Receivable. Assets increase with a debit, and revenues increase with a credit.

## Question 5

The business receives $800 cash for services previously billed on credit. What is the correct journal entry?

A) Debit Cash $800, Credit Accounts Receivable $800
B) Debit Accounts Receivable $800, Credit Cash $800
C) Debit Cash $800, Credit Service Revenue $800
D) Debit Service Revenue $800, Credit Cash $800

**Correct Answer: A**

**Explanation:** Receiving cash for services previously billed means cash (an asset) increases, and the claim against the customer (Accounts Receivable, also an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 6

The company pays its employees salaries of $3,000. What is the correct journal entry?

A) Debit Cash $3,000, Credit Salaries Expense $3,000
B) Debit Salaries Expense $3,000, Credit Cash $3,000
C) Debit Salaries Payable $3,000, Credit Cash $3,000
D) Debit Salaries Expense $3,000, Credit Salaries Payable $3,000

**Correct Answer: B**

**Explanation:** Paying salaries results in an expense (Salaries Expense) and a decrease in cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 7

A business borrows $20,000 from a bank by signing a note payable. What is the correct journal entry?

A) Debit Cash $20,000, Credit Notes Payable $20,000
B) Debit Notes Payable $20,000, Credit Cash $20,000
C) Debit Cash $20,000, Credit Loan Revenue $20,000
D) Debit Loan Expense $20,000, Credit Cash $20,000

**Correct Answer: A**

**Explanation:** Borrowing cash increases the business’s cash (an asset) and creates a liability (Notes Payable). Assets increase with a debit, and liabilities increase with a credit.

## Question 8

The company pays $300 for advertising expenses. Which journal entry is correct?

A) Debit Cash $300, Credit Advertising Expense $300
B) Debit Advertising Expense $300, Credit Cash $300
C) Debit Accounts Payable $300, Credit Advertising Expense $300
D) Debit Advertising Expense $300, Credit Accounts Payable $300

**Correct Answer: B**

**Explanation:** Paying for advertising increases an expense (Advertising Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 9

An owner withdraws $1,500 cash from the business for personal use. What is the correct journal entry?

A) Debit Cash $1,500, Credit Owner’s Capital $1,500
B) Debit Owner’s Capital $1,500, Credit Cash $1,500
C) Debit Drawings $1,500, Credit Cash $1,500
D) Debit Cash $1,500, Credit Drawings $1,500

**Correct Answer: C**

**Explanation:** Owner withdrawals decrease owner’s equity. The Drawings account is used to record these withdrawals, and it increases with a debit. Cash (an asset) decreases with a credit.

## Question 10

The business purchases equipment for $7,000 cash. Which journal entry is correct?

A) Debit Equipment $7,000, Credit Cash $7,000
B) Debit Cash $7,000, Credit Equipment $7,000
C) Debit Equipment $7,000, Credit Accounts Payable $7,000
D) Debit Accounts Payable $7,000, Credit Equipment $7,000

**Correct Answer: A**

**Explanation:** Purchasing equipment increases an asset (Equipment) and decreases another asset (Cash). Assets increase with a debit and decrease with a credit.

## Question 11

A company receives $600 in advance for services to be provided next month. What is the correct journal entry?

A) Debit Cash $600, Credit Service Revenue $600
B) Debit Unearned Revenue $600, Credit Cash $600
C) Debit Cash $600, Credit Unearned Revenue $600
D) Debit Service Revenue $600, Credit Cash $600

**Correct Answer: C**

**Explanation:** Receiving cash in advance for future services increases cash (an asset) and creates a liability (Unearned Revenue) because the company owes services to the client. Assets increase with a debit, and liabilities increase with a credit.

## Question 12

The business pays $200 for utilities expense. Which journal entry is correct?

A) Debit Utilities Expense $200, Credit Cash $200
B) Debit Cash $200, Credit Utilities Expense $200
C) Debit Utilities Payable $200, Credit Cash $200
D) Debit Utilities Expense $200, Credit Utilities Payable $200

**Correct Answer: A**

**Explanation:** Paying for utilities increases an expense (Utilities Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 13

A company sells goods for $1,000 on credit. The cost of goods sold is $600. What are the two journal entries required for this transaction?

A) Debit Accounts Receivable $1,000, Credit Sales Revenue $1,000; Debit Cost of Goods Sold $600, Credit Inventory $600
B) Debit Cash $1,000, Credit Sales Revenue $1,000; Debit Inventory $600, Credit Cost of Goods Sold $600
C) Debit Sales Revenue $1,000, Credit Accounts Receivable $1,000; Debit Inventory $600, Credit Cost of Goods Sold $600
D) Debit Accounts Receivable $1,000, Credit Sales Revenue $1,000; Debit Inventory $600, Credit Cost of Goods Sold $600

**Correct Answer: A**

**Explanation:** A sales transaction involves two entries under the perpetual inventory system. The first entry records the sale: Accounts Receivable (asset increase, debit) and Sales Revenue (revenue increase, credit). The second entry records the cost of the sale: Cost of Goods Sold (expense increase, debit) and Inventory (asset decrease, credit).

## Question 14

The business makes a cash sale of $400. What is the correct journal entry?

A) Debit Sales Revenue $400, Credit Cash $400
B) Debit Cash $400, Credit Sales Revenue $400
C) Debit Accounts Receivable $400, Credit Sales Revenue $400
D) Debit Cash $400, Credit Accounts Receivable $400

**Correct Answer: B**

**Explanation:** A cash sale increases cash (an asset) and increases sales revenue. Assets increase with a debit, and revenues increase with a credit.

## Question 15

A company purchases inventory for $1,500 cash. Which journal entry is correct?

A) Debit Cash $1,500, Credit Inventory $1,500
B) Debit Inventory $1,500, Credit Cash $1,500
C) Debit Purchases $1,500, Credit Cash $1,500
D) Debit Inventory $1,500, Credit Accounts Payable $1,500

**Correct Answer: B**

**Explanation:** Purchasing inventory for cash increases an asset (Inventory) and decreases another asset (Cash). Assets increase with a debit and decrease with a credit.

## Question 16

The business pays $500 for insurance for the next year. What is the correct journal entry?

A) Debit Insurance Expense $500, Credit Cash $500
B) Debit Prepaid Insurance $500, Credit Cash $500
C) Debit Cash $500, Credit Prepaid Insurance $500
D) Debit Insurance Expense $500, Credit Accounts Payable $500

**Correct Answer: B**

**Explanation:** Paying for insurance in advance creates an asset called Prepaid Insurance. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 17

A client returns goods worth $100 that were previously sold on credit. What is the correct journal entry (assuming perpetual inventory system)?

A) Debit Sales Returns and Allowances $100, Credit Accounts Receivable $100; Debit Inventory $100, Credit Cost of Goods Sold $100
B) Debit Accounts Receivable $100, Credit Sales Returns and Allowances $100; Debit Cost of Goods Sold $100, Credit Inventory $100
C) Debit Sales Revenue $100, Credit Accounts Receivable $100; Debit Inventory $100, Credit Cost of Goods Sold $100
D) Debit Cash $100, Credit Sales Returns and Allowances $100; Debit Cost of Goods Sold $100, Credit Inventory $100

**Correct Answer: A**

**Explanation:** When goods are returned, Sales Returns and Allowances (a contra-revenue account, which decreases revenue and thus increases with a debit) increases, and Accounts Receivable (an asset) decreases. Additionally, Inventory (an asset) increases, and Cost of Goods Sold (an expense) decreases.

## Question 18

The business pays $150 for interest on a loan. Which journal entry is correct?

A) Debit Interest Expense $150, Credit Cash $150
B) Debit Cash $150, Credit Interest Expense $150
C) Debit Interest Payable $150, Credit Cash $150
D) Debit Interest Expense $150, Credit Interest Payable $150

**Correct Answer: A**

**Explanation:** Paying interest increases an expense (Interest Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 19

A company receives a bill for $250 for electricity used, to be paid next month. What is the correct journal entry?

A) Debit Utilities Expense $250, Credit Cash $250
B) Debit Cash $250, Credit Utilities Expense $250
C) Debit Utilities Expense $250, Credit Accounts Payable $250
D) Debit Accounts Payable $250, Credit Utilities Expense $250

**Correct Answer: C**

**Explanation:** Receiving a bill for utilities used but not yet paid creates an expense (Utilities Expense) and a liability (Accounts Payable). Expenses increase with a debit, and liabilities increase with a credit.

## Question 20

The business sells an old piece of equipment for $500 cash. The original cost of the equipment was $1,000 and accumulated depreciation was $600. What is the gain or loss on sale and the journal entry?

A) Gain of $100; Debit Cash $500, Debit Accumulated Depreciation $600, Credit Equipment $1,000, Credit Gain on Sale of Equipment $100
B) Loss of $100; Debit Cash $500, Debit Accumulated Depreciation $600, Credit Equipment $1,000, Credit Loss on Sale of Equipment $100
C) Gain of $100; Debit Cash $500, Credit Equipment $500
D) Loss of $100; Debit Cash $500, Credit Equipment $500

**Correct Answer: A**

**Explanation:** The book value of the equipment is Cost – Accumulated Depreciation = $1,000 – $600 = $400. Selling it for $500 cash results in a gain of $100 ($500 – $400). The journal entry removes the equipment (credit Equipment), removes its accumulated depreciation (debit Accumulated Depreciation), records the cash received (debit Cash), and records the gain (credit Gain on Sale of Equipment).

## Question 21

A company issues common stock for $5,000 cash. What is the correct journal entry?

A) Debit Cash $5,000, Credit Common Stock $5,000
B) Debit Common Stock $5,000, Credit Cash $5,000
C) Debit Cash $5,000, Credit Retained Earnings $5,000
D) Debit Retained Earnings $5,000, Credit Cash $5,000

**Correct Answer: A**

**Explanation:** Issuing common stock for cash increases cash (an asset) and increases owner’s equity (Common Stock). Assets increase with a debit, and owner’s equity increases with a credit.

## Question 22

The business pays $700 for repairs to its delivery vehicle. Which journal entry is correct?

A) Debit Vehicle $700, Credit Cash $700
B) Debit Repair Expense $700, Credit Cash $700
C) Debit Cash $700, Credit Repair Expense $700
D) Debit Accounts Payable $700, Credit Repair Expense $700

**Correct Answer: B**

**Explanation:** Paying for repairs increases an expense (Repair Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 23

A company purchases a patent for $10,000 cash. What is the correct journal entry?

A) Debit Cash $10,000, Credit Patent $10,000
B) Debit Patent $10,000, Credit Cash $10,000
C) Debit Patent Expense $10,000, Credit Cash $10,000
D) Debit Research and Development Expense $10,000, Credit Cash $10,000

**Correct Answer: B**

**Explanation:** A patent is an intangible asset. Purchasing it for cash increases an asset (Patent) and decreases another asset (Cash). Assets increase with a debit and decrease with a credit.

## Question 24

The business receives a $1,000 dividend from an investment. Which journal entry is correct?

A) Debit Cash $1,000, Credit Dividend Revenue $1,000
B) Debit Dividend Revenue $1,000, Credit Cash $1,000
C) Debit Investment $1,000, Credit Cash $1,000
D) Debit Cash $1,000, Credit Investment $1,000

**Correct Answer: A**

**Explanation:** Receiving a dividend increases cash (an asset) and increases revenue (Dividend Revenue). Assets increase with a debit, and revenues increase with a credit.

## Question 25

A company pays off $5,000 of its Notes Payable. What is the correct journal entry?

A) Debit Cash $5,000, Credit Notes Payable $5,000
B) Debit Notes Payable $5,000, Credit Cash $5,000
C) Debit Notes Payable $5,000, Credit Interest Expense $5,000
D) Debit Interest Expense $5,000, Credit Cash $5,000

**Correct Answer: B**

**Explanation:** Paying off a liability (Notes Payable) decreases the liability and decreases cash (an asset). Liabilities decrease with a debit, and assets decrease with a credit.

—

# Journal Entries Quiz – Part 2

Here are the remaining 25 multiple-choice questions on Journal Entries, along with their correct answers and detailed explanations.

## Question 26

A company performs services for $1,500 and receives cash immediately. What is the correct journal entry?

A) Debit Cash $1,500, Credit Service Revenue $1,500
B) Debit Service Revenue $1,500, Credit Cash $1,500
C) Debit Accounts Receivable $1,500, Credit Service Revenue $1,500
D) Debit Cash $1,500, Credit Accounts Receivable $1,500

**Correct Answer: A**

**Explanation:** When services are performed and cash is received immediately, cash (an asset) increases, and service revenue increases. Assets increase with a debit, and revenues increase with a credit.

## Question 27

The business pays $400 for office supplies that were purchased on credit last month. Which journal entry is correct?

A) Debit Office Supplies $400, Credit Cash $400
B) Debit Cash $400, Credit Accounts Payable $400
C) Debit Accounts Payable $400, Credit Cash $400
D) Debit Office Supplies $400, Credit Accounts Payable $400

**Correct Answer: C**

**Explanation:** Paying for supplies previously purchased on credit decreases a liability (Accounts Payable) and decreases cash (an asset). Liabilities decrease with a debit, and assets decrease with a credit.

## Question 28

A company declares and pays a cash dividend of $2,000 to its shareholders. What is the correct journal entry?

A) Debit Dividends Expense $2,000, Credit Cash $2,000
B) Debit Retained Earnings $2,000, Credit Cash $2,000
C) Debit Dividends $2,000, Credit Cash $2,000
D) Debit Cash $2,000, Credit Dividends $2,000

**Correct Answer: C**

**Explanation:** When a dividend is declared and paid, the Dividends account (a temporary equity account that reduces retained earnings) increases with a debit, and Cash (an asset) decreases with a credit.

## Question 29

The business receives a bill for $150 for telephone expense, to be paid later. Which journal entry is correct?

A) Debit Telephone Expense $150, Credit Cash $150
B) Debit Cash $150, Credit Telephone Expense $150
C) Debit Telephone Expense $150, Credit Accounts Payable $150
D) Debit Accounts Payable $150, Credit Telephone Expense $150

**Correct Answer: C**

**Explanation:** Receiving a bill for an expense incurred but not yet paid increases an expense (Telephone Expense) and creates a liability (Accounts Payable). Expenses increase with a debit, and liabilities increase with a credit.

## Question 30

A company sells land for $30,000 cash. The original cost of the land was $25,000. What is the correct journal entry?

A) Debit Cash $30,000, Credit Land $30,000
B) Debit Cash $30,000, Credit Land $25,000, Credit Gain on Sale of Land $5,000
C) Debit Cash $30,000, Debit Loss on Sale of Land $5,000, Credit Land $35,000
D) Debit Land $25,000, Credit Cash $30,000, Debit Gain on Sale of Land $5,000

**Correct Answer: B**

**Explanation:** Selling land for more than its cost results in a gain. Cash (an asset) increases with a debit, Land (an asset) decreases with a credit for its original cost, and Gain on Sale of Land (a revenue account) increases with a credit.

## Question 31

The business pays $600 for repairs to its building. Which journal entry is correct?

A) Debit Building $600, Credit Cash $600
B) Debit Repair Expense $600, Credit Cash $600
C) Debit Cash $600, Credit Repair Expense $600
D) Debit Accounts Payable $600, Credit Repair Expense $600

**Correct Answer: B**

**Explanation:** Paying for repairs increases an expense (Repair Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 32

A company purchases a new delivery truck for $25,000, paying $5,000 cash and signing a note payable for the remaining balance. What is the correct journal entry?

A) Debit Delivery Truck $25,000, Credit Cash $25,000
B) Debit Delivery Truck $25,000, Credit Cash $5,000, Credit Notes Payable $20,000
C) Debit Cash $5,000, Debit Notes Payable $20,000, Credit Delivery Truck $25,000
D) Debit Delivery Truck $25,000, Credit Notes Payable $25,000

**Correct Answer: B**

**Explanation:** Purchasing an asset with a combination of cash and a note payable increases the asset (Delivery Truck) with a debit, decreases cash (an asset) with a credit, and increases a liability (Notes Payable) with a credit.

## Question 33

The business receives $700 for services to be performed next month. What is the correct journal entry?

A) Debit Cash $700, Credit Service Revenue $700
B) Debit Unearned Revenue $700, Credit Cash $700
C) Debit Cash $700, Credit Unearned Revenue $700
D) Debit Service Revenue $700, Credit Cash $700

**Correct Answer: C**

**Explanation:** Receiving cash in advance for future services increases cash (an asset) and creates a liability (Unearned Revenue) because the company owes services to the client. Assets increase with a debit, and liabilities increase with a credit.

## Question 34

A company pays its accounts payable of $1,000. Which journal entry is correct?

A) Debit Cash $1,000, Credit Accounts Payable $1,000
B) Debit Accounts Payable $1,000, Credit Cash $1,000
C) Debit Accounts Receivable $1,000, Credit Cash $1,000
D) Debit Cash $1,000, Credit Accounts Receivable $1,000

**Correct Answer: B**

**Explanation:** Paying accounts payable decreases a liability (Accounts Payable) and decreases cash (an asset). Liabilities decrease with a debit, and assets decrease with a credit.

## Question 35

The business purchases merchandise inventory for $3,000 on credit. Which journal entry is correct?

A) Debit Inventory $3,000, Credit Cash $3,000
B) Debit Inventory $3,000, Credit Accounts Payable $3,000
C) Debit Purchases $3,000, Credit Accounts Payable $3,000
D) Debit Accounts Payable $3,000, Credit Inventory $3,000

**Correct Answer: B**

**Explanation:** Purchasing inventory on credit increases an asset (Inventory) and increases a liability (Accounts Payable). Assets increase with a debit, and liabilities increase with a credit.

## Question 36

A company pays $200 for a one-year subscription to a professional magazine. What is the correct journal entry?

A) Debit Magazine Expense $200, Credit Cash $200
B) Debit Prepaid Subscriptions $200, Credit Cash $200
C) Debit Cash $200, Credit Magazine Expense $200
D) Debit Magazine Expense $200, Credit Accounts Payable $200

**Correct Answer: B**

**Explanation:** Paying for a subscription in advance creates an asset called Prepaid Subscriptions. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 37

The business receives $900 cash from a customer for services previously performed on credit. What is the correct journal entry?

A) Debit Cash $900, Credit Service Revenue $900
B) Debit Accounts Receivable $900, Credit Cash $900
C) Debit Cash $900, Credit Accounts Receivable $900
D) Debit Service Revenue $900, Credit Accounts Receivable $900

**Correct Answer: C**

**Explanation:** Receiving cash for services previously billed means cash (an asset) increases, and the claim against the customer (Accounts Receivable, also an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 38

A company pays $1,000 for salaries that were accrued (recorded as Salaries Payable) last period. What is the correct journal entry?

A) Debit Salaries Expense $1,000, Credit Cash $1,000
B) Debit Salaries Payable $1,000, Credit Cash $1,000
C) Debit Cash $1,000, Credit Salaries Payable $1,000
D) Debit Salaries Expense $1,000, Credit Salaries Payable $1,000

**Correct Answer: B**

**Explanation:** Paying a previously accrued liability (Salaries Payable) decreases the liability and decreases cash (an asset). Liabilities decrease with a debit, and assets decrease with a credit.

## Question 39

The business sells an old computer for $100 cash. The original cost was $500 and accumulated depreciation was $450. What is the gain or loss on sale and the journal entry?

A) Gain of $50; Debit Cash $100, Debit Accumulated Depreciation $450, Credit Computer $500, Credit Gain on Sale of Computer $50
B) Loss of $50; Debit Cash $100, Debit Accumulated Depreciation $450, Credit Computer $500, Credit Loss on Sale of Computer $50
C) Gain of $50; Debit Cash $100, Credit Computer $100
D) Loss of $50; Debit Cash $100, Credit Computer $100

**Correct Answer: A**

**Explanation:** The book value of the computer is Cost – Accumulated Depreciation = $500 – $450 = $50. Selling it for $100 cash results in a gain of $50 ($100 – $50). The journal entry removes the computer (credit Computer), removes its accumulated depreciation (debit Accumulated Depreciation), records the cash received (debit Cash), and records the gain (credit Gain on Sale of Computer).

## Question 40

A company issues a check for $300 to pay for repairs that were performed on credit last month. Which journal entry is correct?

A) Debit Repair Expense $300, Credit Cash $300
B) Debit Accounts Payable $300, Credit Cash $300
C) Debit Cash $300, Credit Accounts Payable $300
D) Debit Repair Expense $300, Credit Accounts Payable $300

**Correct Answer: B**

**Explanation:** Paying for repairs previously performed on credit decreases a liability (Accounts Payable) and decreases cash (an asset). Liabilities decrease with a debit, and assets decrease with a credit.

## Question 41

The business purchases a trademark for $8,000 cash. What is the correct journal entry?

A) Debit Cash $8,000, Credit Trademark $8,000
B) Debit Trademark $8,000, Credit Cash $8,000
C) Debit Trademark Expense $8,000, Credit Cash $8,000
D) Debit Research and Development Expense $8,000, Credit Cash $8,000

**Correct Answer: B**

**Explanation:** A trademark is an intangible asset. Purchasing it for cash increases an asset (Trademark) and decreases another asset (Cash). Assets increase with a debit and decrease with a credit.

## Question 42

A company receives $200 in interest revenue. Which journal entry is correct?

A) Debit Cash $200, Credit Interest Revenue $200
B) Debit Interest Revenue $200, Credit Cash $200
C) Debit Accounts Receivable $200, Credit Interest Revenue $200
D) Debit Cash $200, Credit Accounts Receivable $200

**Correct Answer: A**

**Explanation:** Receiving interest increases cash (an asset) and increases revenue (Interest Revenue). Assets increase with a debit, and revenues increase with a credit.

## Question 43

The business pays $1,000 for a one-year advertising campaign. What is the correct journal entry?

A) Debit Advertising Expense $1,000, Credit Cash $1,000
B) Debit Prepaid Advertising $1,000, Credit Cash $1,000
C) Debit Cash $1,000, Credit Advertising Expense $1,000
D) Debit Advertising Expense $1,000, Credit Accounts Payable $1,000

**Correct Answer: B**

**Explanation:** Paying for advertising in advance creates an asset called Prepaid Advertising. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.

## Question 44

A company provides services for $500 and receives a promissory note from the client. What is the correct journal entry?

A) Debit Notes Receivable $500, Credit Service Revenue $500
B) Debit Accounts Receivable $500, Credit Service Revenue $500
C) Debit Service Revenue $500, Credit Notes Receivable $500
D) Debit Cash $500, Credit Service Revenue $500

**Correct Answer: A**

**Explanation:** When services are provided and a promissory note is received, it creates an asset called Notes Receivable (a formal written promise to pay). Service Revenue increases. Assets increase with a debit, and revenues increase with a credit.

## Question 45

The business pays $250 for delivery expenses. Which journal entry is correct?

A) Debit Delivery Expense $250, Credit Cash $250
B) Debit Cash $250, Credit Delivery Expense $250
C) Debit Accounts Payable $250, Credit Delivery Expense $250
D) Debit Delivery Expense $250, Credit Accounts Payable $250

**Correct Answer: A**

**Explanation:** Paying for delivery increases an expense (Delivery Expense) and decreases cash (an asset). Expenses increase with a debit, and assets decrease with a credit.

## Question 46

A company receives a $1,200 bill for legal services, to be paid next month. What is the correct journal entry?

A) Debit Legal Expense $1,200, Credit Cash $1,200
B) Debit Cash $1,200, Credit Legal Expense $1,200
C) Debit Legal Expense $1,200, Credit Accounts Payable $1,200
D) Debit Accounts Payable $1,200, Credit Legal Expense $1,200

**Correct Answer: C**

**Explanation:** Receiving a bill for legal services incurred but not yet paid creates an expense (Legal Expense) and a liability (Accounts Payable). Expenses increase with a debit, and liabilities increase with a credit.

## Question 47

The business sells merchandise inventory for $800 cash. The cost of goods sold is $500. What are the two journal entries required for this transaction?

A) Debit Cash $800, Credit Sales Revenue $800; Debit Cost of Goods Sold $500, Credit Inventory $500
B) Debit Sales Revenue $800, Credit Cash $800; Debit Inventory $500, Credit Cost of Goods Sold $500
C) Debit Cash $800, Credit Sales Revenue $800; Debit Inventory $500, Credit Cost of Goods Sold $500
D) Debit Accounts Receivable $800, Credit Sales Revenue $800; Debit Cost of Goods Sold $500, Credit Inventory $500

**Correct Answer: A**

**Explanation:** A cash sales transaction involves two entries under the perpetual inventory system. The first entry records the sale: Cash (asset increase, debit) and Sales Revenue (revenue increase, credit). The second entry records the cost of the sale: Cost of Goods Sold (expense increase, debit) and Inventory (asset decrease, credit).

## Question 48

A company pays $500 for a new computer monitor. Which journal entry is correct?

A) Debit Office Equipment $500, Credit Cash $500
B) Debit Computer Expense $500, Credit Cash $500
C) Debit Cash $500, Credit Office Equipment $500
D) Debit Office Equipment $500, Credit Accounts Payable $500

**Correct Answer: A**

**Explanation:** Purchasing a computer monitor increases an asset (Office Equipment) and decreases cash (an asset). Assets increase with a debit and decrease with a credit.

## Question 49

The business receives a $300 refund for overpaid utilities. Which journal entry is correct?

A) Debit Cash $300, Credit Utilities Expense $300
B) Debit Utilities Expense $300, Credit Cash $300
C) Debit Cash $300, Credit Accounts Receivable $300
D) Debit Accounts Payable $300, Credit Cash $300

**Correct Answer: A**

**Explanation:** Receiving a refund increases cash (an asset) and decreases the Utilities Expense (a reduction in expense). Assets increase with a debit, and expenses decrease with a credit.

## Question 50

A company pays $1,500 for a one-year software license. What is the correct journal entry?

A) Debit Software Expense $1,500, Credit Cash $1,500
B) Debit Prepaid Software $1,500, Credit Cash $1,500
C) Debit Cash $1,500, Credit Software Expense $1,500
D) Debit Software Expense $1,500, Credit Accounts Payable $1,500

**Correct Answer: B**

**Explanation:** Paying for a software license in advance creates an asset called Prepaid Software. Cash (an asset) decreases. Assets increase with a debit and decrease with a credit.

Related Posts

💬 Leave a Comment