02 THE RECORDING PROCESS - Accounting Process

Which of the following correctly identifies normal balances of accounts?

• a.   Assets                               Debit

        Liabilities                           Credit

        Owner’s Capital                Credit

        Revenues                          Debit

        Expenses                          Credit

• b.   Assets                               Debit

        Liabilities                           Credit

        Owner’s Capital                Credit

        Revenues                          Credit

        Expenses                          Credit

• c.   Assets                               Credit

        Liabilities                           Debit

        Owner’s Capital                Debit

        Revenues                          Credit

        Expenses                          Debit

• d.   Assets                               Debit

        Liabilities                           Credit

        Owner’s Capital                Credit

        Revenues                          Credit

        Expenses                          Debit

 The best interpretation of the word credit is the

• a.   offset side of an account.

• b.   increase side of an account.

• c.         right side of an account.

• d.   decrease side of an account.

In recording an accounting transaction in a double-entry system

• a.   the number of debit accounts must equal the number of credit accounts.

• b.   there must always be entries made on both sides of the accounting equation.

• c.   the amount of the debits must equal the amount of the credits.

• d.   there must only be two accounts affected by any transaction.

Debits

• a.   decrease both assets and liabilities.

• b.   decrease liabilities and increase assets.

• c.   increase both assets and liabilities.

• d.   increase liabilities and decrease assets.

A debit is not the normal balance for which account listed below?

• a.         Owner’s Drawings

• b.   Cash

• c.   Accounts Receivable

• d.   Service Revenue

An accountant has debited an asset account for $1,400 and credited a liability account for $500. What can be done to complete the recording of the transaction?

• a.   Nothing further must be done.

• b.   Debit an owner’s equity account for $900.

• c.         Debit another asset account for $900

• d.   Credit a different asset account for $900.

Liverpool Limited pays its employees twice a month, on the 7^th and the 21^st. On June 21, Liverpool Limited paid employee salaries of £6,000. This transaction would

• a.   increase owner’s equity by £6,000.

• b.   decrease the balance in Salaries and Wages Expense by £6,000.

• c.   decrease net income for the month by £6,000.

• d.   be recorded by a £6,000 debit to Salaries and Wages Payable and a £6,000 credit to Salaries and Wages Expense.

Qwik Company showed the following balances at the end of its first year:

Cash                                                       $  8,700

Prepaid insurance                                        9,400

Accounts receivable                                     7,000

Accounts payable                                        5,800

Notes payable                                             9,400

Owner’s Capital                                           2,300

Owner’s Drawings                                        1,400

Revenues                                                  44,000

Expenses                                                  35,000

What did Qwik Company show as total credits on its trial balance?

• a.   $52,400

• b.   $61,500

• c.   $62,900

• d.   $70,900

Bertoli Company showed the following balances at the end of its first year:

Cash                                                       $  4,000

Prepaid insurance                                        7,000

Accounts receivable                                     8,000

Accounts payable                                        4,000

Notes payable                                             7,000

Owner’s Capital                                           3,000

Owner’s Drawings                                        2,000

Revenues                                                  32,000

Expenses                                                  25,000

 

What did Bertoli Company show as total credits on its trial balance?

• a.   $14,000

• b.   $46,000

• c.   $44,000

• d.   $48,000

On July 7, 2020, Rancho Realty Co. performed cash services of $1,900. The entry to record this transaction would include

• a.   a debit to Service Revenue of $1,900.

• b.   a credit to Accounts Receivable of $1,900.

• c.   a debit to Cash of $1,900.

• d.   a credit to Accounts Payable of $1,900.