02 Principal of Accounting

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.

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

At December 1, 2020, Dubois Company’s accounts receivable balance was $1,300. During December, Dubois had credit sales of $7,400 and collected accounts receivable of $6,000. At December 31, 2020, the accounts receivable balance is

• a.   $100 debit.

• b.   $2,700 debit.

• c.   $100 credit.

• d.   $2,700 credit.

In recording business transactions, evidence that an accounting transaction has taken place is obtained from

• a.   business documents.

• b.   the taxing authority.

• c.         the public relations department.

• d.   government agencies.

The first step in the recording process is to

• a.   prepare financial statements.

• b.   analyze each transaction for its effect on the accounts.

• c.   post to a journal.

• d.   prepare a trial balance.

The entire group of accounts maintained by a company is called the

• a.   chart of accounts.

• b.   general journal.

• c.   general ledger.

• d.   trial balance.