College Accounting, 14e (Slater)
Chapter 2 Debits and Credits: Analyzing and Recording Business Transactions
2.1 Learning Objective 2-1
1) Accounts Payable had a normal starting balance of $900. There were debit postings of $100 and credit
postings of $450 during the month. The ending balance is:
A) $1,250 credit.
B) $1,450 debit.
C) $1,250 debit.
D) $1,450 credit.
2) The beginning balance in the Equipment account was $4,000. The company purchased an additional
$1,000 worth of Equipment. The ending balance in the account is:
A) debit of $3,000.
B) credit of $4,000.
C) debit of $5,000.
D) credit of $3,000.
3) An accounting tool used to record increases and decreases in individual Assets, Liabilities, Capital,
Revenue, Expenses, and Owner’s Drawing is a(n):
A) chart of accounts.
B) account.
C) trial balance.
D) footing.
4) A formal account that has columns for date, explanation, posting reference, debit, and credit is called
the:
A) T account.
B) standard account form.
C) ledger.
D) chart of accounts.
5) A ledger:
A) includes all company accounts and their related balances.
B) can replace the financial statements.
C) is the same as a chart of accounts.
D) is known as a worksheet.
6) The right side of any account is the:
A) debit side.
B) credit side.
C) ending balance.
D) beginning balance.
7) The left side of any account is the:
A) debit side.
B) credit side.
C) ending balance.
D) beginning balance.
8) An account is said to have a debit balance if:
A) the footing of the debits exceeds the footing of the credits.
B) there are more entries on the debit side than on the credit side.
C) its normal balance is debit without regard to the amounts or number of entries on the debit side.
D) the last entry of the accounting period was posted on the debit side.
9) The ledger is:
A) a group of accounts that records results from business transactions.
B) a tool used to ensure that all accounts have normal balances.
C) a chronological record of the day’s transactions.
D) a tool used to ensure that debits equal credits.
10) The credit side is always the left side of the account.
11) A T account is used for demonstration purposes.
12) Explain the difference between expenses and withdrawals.
2.2 Learning Objective 2-2
1) A compound entry is:
A) a transaction involving more than one debit and/or credit.
B) used to prepare the trial balance.
C) to duplicate an entry.
D) found on the income statement.
2) The rules of debit and credit require increases to be posted to the:
A) debit side.
B) credit side.
C) normal balance.
D) None of these answers is correct.
3) The Accounts Payable account is:
A) a capital, and it has a normal debit balance.
B) a withdrawal, and has a normal credit balance.
C) a liability, and it has a normal debit balance.
D) a liability, and it has a normal credit balance.
4) An account that would be increased by a credit is:
A) Cash.
B) Prepaid Expense.
C) Utilities Expense.
D) Unearned Revenue.
5) A debit may signify a(n):
A) increase in Asset account.
B) decrease in Revenue account.
C) decrease in the Liability account.
D) All of the above
6) A credit may signify a(n):
A) increase in assets.
B) decrease in liabilities.
C) increase in revenue.
D) increase in withdrawals.
7) Which of the following types of accounts has a normal credit balance?
A) Withdrawals
B) Assets
C) Expenses
D) None of the above
8) Which of the following types of accounts has a normal debit balance?
A) Withdrawals
B) Assets
C) Expenses
D) All of these answers are correct.
9) When recording transactions in two or more accounts and the totals of the debits and credits are equal,
it is called:
A) debiting.
B) crediting.
C) balancing.
D) double-entry bookkeeping.
10) Which of the following groups of accounts have a normal debit balance?
A) Revenue, liabilities, and expenses
B) Assets, capital, and withdrawals
C) Liabilities, expenses, and assets
D) Assets, expenses, and withdrawals
11) Which of the following accounts would be increased by a debit?
A) Supplies
B) Accounts Payable
C) Capital
D) Service Revenue
12) What is a proper entry to show the owner making an investment in the company?
A) A credit to Cash and a debit to Capital
B) A debit to Cash and a credit to Capital
C) A debit to Cash and a credit to Revenue
D) A credit to Cash and a debit to Revenue
13) Which of the following entries would be used to record the billing of fees earned?
A) Debit Accounts Receivable and credit Rental Fees
B) Credit Cash and credit Rental Fees
C) Debit Accounts Payable and credit Rental Fees
D) Debit Rental Fees, credit Accounts Receivable.
14) Which of the statements of the rules of debit and credit is true?
A) Decrease Accounts Receivable with a credit and the normal balance is a credit.
B) Increase Accounts Payable with a credit and the normal balance is a credit.
C) Increase Revenue with a debit and the normal balance is a debit.
D) Decrease Cash with a debit and the normal balance is a debit.
15) Which of the following entries records the investment of cash by Sam, owner of a sole proprietorship?
A) Debit John, Capital; credit Cash
B) Debit Cash; credit Revenue
C) Debit Sam, Withdrawals; credit Revenue
D) Debit Cash; credit Sam, Capital
16) Bill, owner of Bill’s Golf Center, withdrew $1,600 in cash from the business. Record the transaction by:
A) debiting Bill, Withdrawals, $1,600; crediting Cash, $1,600.
B) debiting Accounts Receivable, $1,600; crediting Cash, $1,600.
C) debiting Expense, $1,600; crediting Cash, $1,600.
D) debiting Bill, Withdrawals, $1,600; crediting Bill, Capital, $1,600.
17) The entry to record Tom’s payment of a home telephone bill is:
A) debit Accounts Payable; credit Telephone Expense.
B) debit Tom, Withdrawals; credit Cash.
C) debit Telephone Expense; credit Cash.
D) debit Tom, Withdrawals; credit Accounts Payable.
18) Excel Home bought painting equipment on account for $5,000. The entry would include:
A) debit to Supplies Expense, $5,000; credit to Cash, $5,000.
B) debit to Equipment, $5,000; credit to Cash, $5,000.
C) debit to Equipment, $5,000; credit to Accounts Payable, $5,000.
D) debit to Supplies Expense, $5,000; credit to Accounts Payable, $5,000.
19) The owner of BobCats R Us paid his personal Visa Card bill using a company check. The correct entry
to record the transaction is:
A) credit Cash; debit Capital.
B) credit Cash; debit Supplies Expense.
C) credit Cash; debit Withdrawals.
D) credit Cash; debit Accounts Payable.
20) Susan flew to San Francisco on a business trip that will be reimbursed by her employer. The purchase
price of the ticket was $800 and it was bought on account. The entry to record the transaction is:
A) debit Accounts Payable, $800; credit Travel Expense, $800.
B) debit Capital, $800; credit Accounts Payable, $800.
C) debit Travel Expense, $800; credit Accounts Payable, $800.
D) debit Travel Expense, $800; credit Cash, $800.
21) The Accounts Payable account has total credit postings of $2,500 and debit postings of $1,500. The
balance of the account is:
A) $1,000 debit.
B) $1,000 credit.
C) $4,000 credit.
D) $4,000 debit.
22) The Salaries Payable account has total debit postings of $1,100 and credit postings of $1,500. The
ending balance of the account is:
A) $2,600 debit.
B) $400 credit.
C) $2,600 credit.
D) $400 debit.
23) Office Supplies had a normal starting balance of $95. There were debit postings of $120 and credit
postings of $60 during the month. The ending balance of the account is:
A) $85 debit.
B) $85 credit.
C) $155 debit.
D) $155 credit.
24) Accounts Payable has a normal balance of $1,100. After paying to creditors $300, the balance in the
account is:
A) debit $800.
B) debit $1,400.
C) credit $800.
D) credit $1,400.
25) The beginning balance in Cash was $5,000. Additional cash of $2,600 was received. Checks were
written totaling $3,300. The ending balance in cash is:
A) $2,400.
B) $7,600.
C) $5,700.
D) $4,300.
26) A credit to an asset account was posted as a credit to the Revenue account. This error would cause:
A) revenue to be overstated.
B) liabilities to be overstated.
C) capital to be understated.
D) Both A and C are correct.
27) A credit to a liability account was posted as a credit to an expense account. This error would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) expenses to be overstated.
D) liabilities to be understated.
28) A debit to an expense account was posted as a debit to a revenue account. This error would cause:
A) assets to be overstated.
B) expenses to be overstated.
C) revenue to be understated.
D) None of the above is correct.
29) A credit to an asset account was posted as a credit to a revenue account. This error would cause:
A) assets to be overstated.
B) revenue to be overstated.
C) expenses to be overstated.
D) Both A and B are correct.
30) A credit to a liability account was posted as a debit to the Revenue account. This error would cause:
A) Liability to be overstated.
B) Revenue to be understated.
C) Revenue to be overstated.
D) None of the above is correct.
31) A debit to an asset account was posted as a debit to an expense account. This error would cause:
A) liabilities to be overstated.
B) expenses to be overstated.
C) assets to be understated.
D) Both B and C are correct.
32) A debit to a Liability account was posted as a debit to an Asset account. This error would cause:
A) Asset to be understated.
B) Liabilities to be understated.
C) Asset to be overstated.
D) None of the above is correct.
33) A debit to an asset account was posted as a debit to a liability account. This error would cause:
A) assets to be understated.
B) liabilities to be overstated.
C) capital to be understated.
D) None of the above is correct.
34) The chart of accounts:
A) is a numbered list of all of the business’s accounts.
B) allows accounts to be located quickly.
C) can be expanded as the business grows.
D) All of the above are correct.
35) A credit to an asset account was posted as a credit to a liability account. This error would cause:
A) assets to be understated.
B) liabilities to be overstated.
C) capital to be understated.
D) None of the above is correct.
36) The business incurred an expense and planned to pay for the expense later on credit. To record this:
A) an expense is debited and a liability is credited.
B) an expense is debited and an asset is credited.
C) an asset is debited and asset is credited.
D) None of the above answers are correct.
37) The business provided services for cash. To record this:
A) an asset is credited and a liability is credited.
B) an asset is credited and a revenue is credited.
C) an expense is debited and Capital is credited.
D) None of the above answers are correct.
38) The owner invested a personal truck in the business. To record this transaction:
A) debit Equipment and credit Revenue.
B) debit Accounts Payable and credit Equipment.
C) debit Equipment and credit Capital.
D) credit Equipment and debit Capital.
39) Which of the following errors would cause the trial balance to be out of balance?
A) An entry is posted twice.
B) An entry is not posted at all.
C) A debit is entered as $500 and the credit is entered at $5,000.
D) None of the above answers are correct.
40) The business bought supplies on account. To record this:
A) an expense is debited and a liability is credited.
B) an asset is debited and a liability is credited.
C) an asset is credited and a liability is credited.
D) None of the above answers are correct.
41) A liability would be debited and an asset credited if:
A) the business paid a creditor.
B) the business incurred an expense and did not pay the expense immediately.
C) the business bought supplies on account.
D) the business bought supplies for cash.
42) One asset would be debited and another credited if:
A) the business provided services to a cash customer.
B) the business paid a creditor.
C) the business bought supplies paying cash.
D) the business provided services to a credit customer.
43) An asset would be debited and another asset credited if:
A) the business bought supplies for cash.
B) the business incurred an expense and paid it.
C) the business bought equipment on account.
D) None of these is correct.
44) What would be the effect on the accounts if the business provided services to a customer on account?
A) An asset would be debited and an expense credited.
B) Capital would be debited and Revenue credited.
C) An asset would be debited and Revenue credited.
D) An asset would be debited and Capital credited.
45) What would be the effect on the accounts if the business provided services to a credit customer?
A) An asset would be debited and an expense debited.
B) Capital would be credited and Revenue credited.
C) An asset would be debited and Revenue credited.
D) An asset would be debited and Capital credited.
46) What would be the effect on the accounts if the owner invested cash into the business?
A) An asset would be debited and Capital credited.
B) Withdrawals would be debited and an asset credited.
C) An asset would be debited and a revenue credited.
D) A Revenue would be debited and Capital credited.
47) What would be the effect on the accounts if the business purchased equipment on account?
A) An asset would be debited and an expense debited.
B) Expense would be debited and Liability credited.
C) An asset would be debited and Liability debited.
D) An asset would be debited and a Liability credited.
48) What would be the effect on the accounts if the business received the telephone bill but did not pay it
immediately?
A) An expense would be debited and an asset credited.
B) Capital would be debited and Revenue credited.
C) An expense would be debited and a liability credited.
D) An asset would be debited and Capital credited.
49) An account that would be increased by a debit is:
A) Cash.
B) Fees Earned.
C) Capital.
D) Accounts Payable.
50) Which of the following groups of accounts have a normal credit balance?
A) Revenue, liabilities, and capital
B) Assets, capital, and withdrawals
C) Liabilities, expenses, and assets
D) Assets, expenses, and withdrawals
51) A chart of accounts:
A) is set up in alphabetical order.
B) is a list of customer accounts.
C) is a listing of all the accounts in order of dollar value.
D) None of the above are correct.
52) Accounts receivable decrease on the credit side of the account.
53) In accrual basis accounting, revenues are recorded when earned.
54) Cash is credited when the business makes a payment for supplies.
55) Debits must always exceed credits in a transaction or journal entry.
56) The debit side of all accounts decreases the account balance and the credit side of all accounts
increases the account balance.
57) The debit side is always the left side of Asset accounts only.
58) A transaction that involves more than one credit or more than one debit is called a compound entry.
59) The right side of an account is always the normal balance side.
60) Double-entry accounting requires transactions to affect two or more accounts, and the total of the
debits to be greater than the credits.
61) Three accounts are affected in every transaction.
62) Withdrawals increase on the credit side of the account.
63) After deciding which accounts are affected, the next step in analyzing a transaction is to determine to
which categories the accounts belong.
64) Equipment is an example of a Capital account.
65) A compound entry is when more than one transaction occurs.
66) When the owner invests personal equipment in the business, cash is decreased.