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Journal Entries: Debits and Credits quiz #1 Flashcards

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Journal Entries: Debits and Credits quiz #1
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  • What is the basic principle behind every accounting transaction?
    Every accounting transaction involves giving something up and receiving something in return, affecting at least two accounts.
  • How many accounts are affected by each transaction in accounting?
    Each transaction affects at least two accounts.
  • What system is used to record transactions in accounting?
    The system of debits and credits is used to record transactions in accounting.
  • What must be true about the total debits and credits in every transaction?
    The total debits must always equal the total credits in every transaction.
  • How do asset accounts change with debits and credits?
    Asset accounts increase with debits and decrease with credits.
  • How do expense accounts change with debits and credits?
    Expense accounts increase with debits and decrease with credits.
  • How do liability accounts change with debits and credits?
    Liability accounts increase with credits and decrease with debits.
  • How do equity accounts change with debits and credits?
    Equity accounts increase with credits and decrease with debits.
  • How do revenue accounts change with debits and credits?
    Revenue accounts increase with credits and decrease with debits.
  • Why is it important to memorize the rules of debits and credits?
    Memorizing the rules of debits and credits is crucial because it ensures accurate recording of transactions and helps maintain balanced accounts.
  • What happens to the cash account when a company receives cash?
    When a company receives cash, the cash account is debited, increasing its balance.
  • What happens to the cash account when a company pays cash for something?
    When a company pays cash, the cash account is credited, decreasing its balance.
  • If a company buys land with cash, which accounts are affected and how?
    The land (asset) account is debited (increased) and the cash (asset) account is credited (decreased).
  • If a company sells inventory, which accounts are affected and how?
    The inventory (asset) account is credited (decreased) and the revenue account is credited (increased).
  • What is the effect of a debit on an asset account?
    A debit increases an asset account.
  • What is the effect of a credit on a liability account?
    A credit increases a liability account.
  • What is the effect of a debit on an expense account?
    A debit increases an expense account.
  • What is the effect of a credit on an equity account?
    A credit increases an equity account.
  • What is the effect of a debit on a revenue account?
    A debit decreases a revenue account.
  • What is the effect of a credit on an asset account?
    A credit decreases an asset account.
  • Which types of accounts have a normal credit balance in financial accounting?
    Liabilities, equity, and revenue accounts have a normal credit balance.
  • When is an account said to have a debit balance?
    An account has a debit balance when the total debits exceed the total credits in that account.
  • What are the four parts of a journal entry in accounting?
    The four parts of a journal entry are: (1) the date of the transaction, (2) the accounts affected, (3) the amounts to be debited and credited, and (4) a brief description or explanation of the transaction.
  • Expenses follow the same debit and credit rules as which type of account?
    Expenses follow the same debit and credit rules as asset accounts.
  • What does a debit to an asset account indicate?
    A debit to an asset account indicates an increase in the asset.
  • What can a credit signify in accounting?
    A credit can signify an increase in liabilities, equity, or revenue, or a decrease in assets or expenses.
  • What does a credit to a liability account represent?
    A credit to a liability account represents an increase in the liability.
  • Does common stock have a normal debit or credit balance?
    Common stock has a normal credit balance.
  • Is common stock increased by a credit or a debit?
    Common stock is increased by a credit.
  • A debit signifies a decrease in which types of accounts?
    A debit signifies a decrease in liabilities, equity, and revenue accounts.
  • What is the effect of a debit to salaries expense?
    A debit to salaries expense increases the expense account.
  • What is the effect of a credit to the cash account?
    A credit to the cash account decreases the cash balance.
  • Which account type normally has a credit balance?
    Liabilities, equity, and revenue accounts normally have a credit balance.
  • What does a credit to a liability account indicate?
    A credit to a liability account indicates an increase in the liability.
  • What is the effect of a credit to cash?
    A credit to cash decreases the cash account.
  • A debit is used to record which types of transactions?
    A debit is used to record increases in assets and expenses, and decreases in liabilities, equity, and revenue.
  • What is the journal entry when equipment is purchased on credit?
    Debit the equipment (asset) account and credit the accounts payable (liability) account.
  • Is common stock increased by a debit or a credit?
    Common stock is increased by a credit.
  • Does common stock have a normal credit balance?
    Yes, common stock has a normal credit balance.
  • Which accounts have a normal credit balance?
    Liabilities, equity, and revenue accounts have a normal credit balance.