Concept: Journal Entries: Debits and Credits3m
Example: Journal Entry5m
Problem: The Goods Company purchased goods from its suppliers. The goods cost $20,000. Record the transaction.4m
Which of the following accounts would be increased with a debit?
a. Contributed Capital
b. Retained Earnings
For each account listed below, determine if the account is increased by a debit or a credit.
1. Cost of goods sold is an expense account and thus is increased with a _______________.
2. Patent is an asset account and thus is increased with a _______________.
3. Interest payable is a liability account and thus is increased with a _______________.
4. Retained earnings is an equity account and thus is increased with a _______________.
5. Interest revenue is a revenue account and thus is increased with a _______________.
The normal balance for an asset account is:
c. Sometimes a debit and sometimes a credit
d. There is not enough information to answer this question.
The following comments each relate to the recording of journal entries. Which statement is true?
a. For any given journal entry, debits must exceed credits.
b. It is customary to record credits on the left and debits on the right.
c. The chart of accounts reveals the amount to debit and credit to the affected accounts.
d. Journalization is the process of converting transactions and events into debit/credit format.
Which of the following would increase both assets and liabilities?
a. Provide services to customers on account.
b. Purchase office supplies on account.
c. Pay dividends to stockholders.
d. Received a utility bill but do not pay for it.
The following statements pertain to recording transactions. Which statement(s) are true?
I. Total debits should equal total credits.
II. It is possible to have multiple debits or credits in one journal entry.
III. Assets are always listed first in journal entries.
IV. Some journal entries will have debits only.
a. I only.
b. I and II.
c. I, II, and IV.
d. II, III, and IV.
Paying cash to a vendor for an account payable would:
a. Decrease total assets and decrease owners’ equity
b. Decrease total assets and increase owner’s equity
c. Decrease total assets and decrease liabilities
d. Decrease net income and decrease assets
e. Have no effect on total assets or owners’ equity
The reason that revenue is recorded by a "credit entry" to a revenue account is:
a. That revenue always involves a debit to the Cash account.
b. The realization principle.
c. The matching principle.
d. That revenue increases owners' equity.
Which of the following accounts are expected to have normal debit balances?
a. assets and expenses
b. assets and liabilities
c. liabilities and equity
d. liabilities and expenses
Determine which line in the schedule correctly reflects the rule of Debits and Credits.
a. Line A
b. Line B
c. Line C
d. Line D