The document contains multiple choice questions about basic accounting concepts such as journal entries, debits and credits, the accounting equation, and the normal balances of various accounts. It tests the understanding of increasing and decreasing asset, liability, equity, revenue and expense accounts through journal entries. The questions cover topics like recording transactions, preparing income statements, and the impact of accrual accounting versus cash basis accounting.
The document contains multiple choice questions about basic accounting concepts such as journal entries, debits and credits, the accounting equation, and the normal balances of various accounts. It tests the understanding of increasing and decreasing asset, liability, equity, revenue and expense accounts through journal entries. The questions cover topics like recording transactions, preparing income statements, and the impact of accrual accounting versus cash basis accounting.
The document contains multiple choice questions about basic accounting concepts such as journal entries, debits and credits, the accounting equation, and the normal balances of various accounts. It tests the understanding of increasing and decreasing asset, liability, equity, revenue and expense accounts through journal entries. The questions cover topics like recording transactions, preparing income statements, and the impact of accrual accounting versus cash basis accounting.
The document contains multiple choice questions about basic accounting concepts such as journal entries, debits and credits, the accounting equation, and the normal balances of various accounts. It tests the understanding of increasing and decreasing asset, liability, equity, revenue and expense accounts through journal entries. The questions cover topics like recording transactions, preparing income statements, and the impact of accrual accounting versus cash basis accounting.
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1.
Use the following information for questions 1 and 2:
A company receives $500 of cash as an additional investment in the company by its owner, Mary Smith. The company's Cash account is increased and Mary Smith, Capital is increased. 2. 1. Should the $500 entry to the Cash account be a debit? Yes
No 3. 2. Should the $500 entry to Mary Smith, Capital be a debit? Yes
No 4. Use the following information for questions 3 through 6: A company using the accrual method of accounting performed services on account in August. The services were for $2,000 and the company gave the customer credit terms that state the amount is to be paid to the company in September. 5. 3. Assuming that the company prepares monthly income statements, what will be the account debited for $2,000 in August? Cash
Accounts Receivable
Service Revenue 6. 4. Which account should the company credit for $2,000 in August? Cash
Accounts Receivable
Service Revenue 7. 5. In September when the company receives the $2,000 from the customer, which account should the company debit? Cash
Accounts Receivable
Service Revenue 8. 6. In September when the company receives the $2,000 from the customer, which account should the company credit? Cash
Accounts Receivable
Service Revenue 9. 7.To increase the balance in the following accounts, would you debit the account or would you credit the account? Accounts Payable Debit
Credit 12. 10. Generally when an expense is involved in a transaction, an expense will be Debited
Credited 13. 11. Generally when revenues are involved in a transaction, a revenue account will be Debited
Credited 14. 12. The accountant's word to indicate that an entry will be recorded on the left-side of an account is Debit
Credit 15. 13. A contra-asset account such as Accumulated Depreciation will likely have which balance? Debit
Credit 16. 14. A contra-liability account such as Discount on Notes Payable will likely have which balance? Debit
Credit
Mark the Practice Quiz as Complete
Journal Entries Key Things To Know | Quick Study Sheet | Practice as You Learn | Easy Practice Test | Medium Practice Test | Hard Practice Test | Self Test
Answers to Easy Practice Test
1. A revenue account is credited this period when
a. services are provided to a customer this period b. services are provided to the company this period c. services are paid for this period and provided next period d. income is earned last period
A. A revenue account is credited when it is increased. Revenues are recorded with an increase when the revenue is earned this period; a good or service has been provided this period. (b.) is an expense.
2. An expense account is debited this period when
a. services are provided to a customer this period b. services are provided to the company this period c. services will be paid for this period and provided next period d. services will be provided to the company next period
B. Expense accounts are debited when they increase. A service provided to the company this period is an increase in to the expense this period.
3. What is recorded when wages are paid to employees who worked this period? a. a debit to an asset and a credit to a liability b. a credit to a revenue and a debit to an asset c. a debit to an expense and a credit to an asset d. a debit to a liability and a credit to a revenue
C. Wages paid to employees who worked this period is an increase to an expense and a decrease to cash. Increasing an expense is a debit and decreasing cash, an asset, is a credit.
4. Dividends earned and not yet received are recorded with
a. a debit to an asset and a credit to a liability b. a credit to a revenue and a debit to an asset c. a debit to an expense and a credit to an asset d. a debit to a liability and a credit to cash
B. Earned means it is a revenue. Revenues increase with a credit. Not yet received is a receivable which is an asset. Assets increase with a debit.
5. Using up prepaid rent is recorded with
a. a credit to a liability b. a debit to an expense c. a credit to an expense d. a debit to an asset
B. Using up the asset prepaid rent is an expense. An increase to an expense is recorded with a debit. Using an asset is also a decrease to the asset which is recorded with a credit. This is not one of the choices.
6. Cash paid for salaries owed to employees for working last month is recorded with a. a debit to a liability b. a credit to an expense c. a credit to a revenue d. a debit to an expense
A. Paying for an amount owed is a decrease to cash and a decrease to the liability. Assets are decreased with a credit and liabilities are decreased with a debit. The expense was recorded last period with a debit when the service was provided.
7. Depreciation expense is recorded in the same transaction as
a. a credit to equipment b. a credit to accumulated depreciation c. a credit to accrued expenses d. a credit to prepaid expenses
B. Accumulated depreciation is the account that is always credited when recording depreciation expense. This account is the total of all prior years depreciation expense. Accumulated depreciation is a contra asset account which means it is opposite of an asset. Assets increase with a debit, so accumulated depreciation is increased with a credit (opposite).
8. An increase to an expense will be recorded in the same transaction with
a. a credit to a liability b. a debit to a liability c. a credit to a revenue d. a credit to owners equity
A. The expense must be paid for now or paid for later. The expense is a debit, so the other account must be a credit. Payment now decreases the asset cash. Decreasing an asset is done with a credit which is not one of the choices. Paying later increases a liability which is done with a credit (b). A revenue and expense is not recorded together in the same journal entry.
9. The company issued stock to investors. Which of the following is done to record this transaction? a. credit owners equity and debit retained earnings b. debit an asset and credit an asset c. credit an assets and debit a liability d. debit an asset and credit owners equity
D. Issuing stock to investors increases cash, recorded with a debit, and increases common stock, recorded with a credit. 10. The company purchases a truck and pays cash. Which of the following is done to record this transaction? a. debit cash and credit truck b. debit truck and credit accounts payable c. debit truck and credit cash d. debit truck expense and credit cash
C. Truck increases and cash decreases. Both are assets. The truck increases with a debit and the cash decreases with a credit.
11. Journal entries are used for the purpose of
a. recording transactions only b. recording and summarizing transactions c. determining if the accounting equation balances d. listing all the account names used
A. Journal entries are made to record transactions. T accounts summarize transactions to get account balances that are reported on the financial statements. Recording debits and credits properly will balance the accounting equation (c.) A trial balance lists all account names used.
12. Which of the following transactions requires a credit to a liability account?
a. purchase an asset and pay cash b. purchase an asset and agree to pay later c. issue common stock d. repay a liability
B. A credit to a liability account is an increase. An increase to a liability occurs when the company borrows to purchase an asset and pays later. Repaying a liability is a debit to the liability (d.) (a. & c.) do not impact a liability.
13. The account name debited when the company pays a supplier is a. accounts receivable b. accounts payable c. supplies d. cash
B. Owing a supplier is called accounts payable. Cash is credited when payment is made. Accounts payable is debited.
14. The account name debited when the company collects from a customer is a. cash b. accounts payable c. accounts receivable d. none of the above
A. Amounts owed from the customer is accounts receivable. The customer pays cash to the company. Cash is increased (debit) and accounts receivable is decreased (credit); both are assets. 15. Account names that will not be used to record the same transaction are a. cash and accounts receivable b. cash and inventory c. accounts receivable and accounts payable d. accounts payable and cash
C. The company can not owe someone and be owed as a result of the same transaction. The other choices are cash being paid or collected, which are common transactions.
16. Record journal entries for following transactions. After recording the transactions, prepare a T account and balance the cash account.
a. Issued stock to investors for $125,000 cash
b. Purchased office furniture for $3,200, agree to pay the entire amount in 2 years. c. Purchased computers for the office for $1,200 cash d. Paid for rent for the next 3 months, $600 e. Purchased office supplies for $75 cash f. Purchased inventory on account for $15,000 g. Paid $11,000 to the supplier for the inventory purchased in f. h. Hired employees who will begin work in 2 weeks i. Borrowed $10,000 from the bank to be repaid in 6 months j. Loaned $2,500 to a company who agrees to repay it in 2 years
Answer:
a. Cash 125,000 Common Stock 125,000
Asset Increase Debit
Owners Equity Increase - Credit
b. Office Furniture 3,200
L/T Notes Payable 3,200
Asset Increase - Debit
Liability Increase - Credit
c. Computers 1,200 Cash 1,200
Asset Increase Debit
Asset Decrease - Credit
d. Prepaid Rent 600
Cash 600
Asset Increase Debit
Asset Decrease - Credit e. Office Supplies 75 Cash 75
Asset Increase Debit
Asset Decrease - Credit
f. Inventory 15,000 Accounts Payable 15,000
Asset Increase - Debit
Liability Increase - Credit
g. Accounts Payable 11,000
Cash 11,000
Liability Decrease Debit
Asset Decrease - Credit
h. No entry recorded, no exchange has taken place
i. Cash 10,000 S/T Notes Payable 10,000
Asset Increase - Debit
Liability Increase - Credit
j. L/T Notes Receivable 2,500
Cash 2,500
Asset Increase Debit
Asset Decrease - Credit
Cash ______________________ 125,000 / 1,200 10,000 / 600 / 75 / 11,000 / 2,500 __________ /__________ 135,000 / 15,375 119,625 / 17. Record journal entries for the following transactions. After recording the transactions, prepare a T account and balance the accounts payable account.
a. Borrowed $50,000 from the bank, agreed to repay it in 3 years
b. Purchased manufacturing equipment for $20,000 cash c. Purchased office furniture on account, $2,700 d. Paid for insurance for the next 6 months, $2,200 e. Repaid $10,000 of the amount borrowed from the bank f. Purchased inventory on account, $15,000 g. Purchased supplies for cash, $100 h. Paid the supplier $14,000 for inventory purchased on account i. Invested $3,000 in a short term investment j. Sold part of the company to investors for $50,000 cash
Answer:
1. Cash 50,000 2. Manufacturing Equipment 20,000
L/T Notes Payable 50,000 Cash 20,000
To record borrowed cash. To record purchased manufacturing equipment
18. A company had the following transactions during the first month of operations. Record journal entries for these transactions. Determine the balance in the cash account at the end of the first month.
a.) Received $150,000 cash from investors for ownership in the company. b.) Purchased inventory to be sold to customers, $45,000 on account. c.) Rented warehouse space, $6,000 was paid for this month. d.) Sold $5,000 of inventory on account (you have not been paid yet), sales price of $7,500. e.) Acquired office furniture for $3,000 cash f.) Paid $12,000 to employees who worked this month. g.) Acquired manufacturing equipment costing $39,000, paid cash. h.) Paid $700 for janitorial service. i.) Received a $100 utility bill for this month. j.) Collected $7,500 owed from customers.
Answer:
a. Cash 150,000 Common Stock 150,000
Asset Increase Debit
Owners Equity Increase - Credit
b. Inventory 45,000 Accounts Payable 45,000
Asset Increase - Debit
Liability Increase - Credit
c. Rent Expense 6,000
Cash 6,000
Expense Increase Debit
Asset Decrease - Credit d. Accounts Receivable 7,500 Sales 7,500
