Questions and Answers
What is the account classification for Prepaid Insurance?
What is the normal balance for the Sales account?
Credit
What is the increase side for the Supplies account?
What is the classification for Accounts Receivable?
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What is the increase side for the Advertising Expense account?
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What is the account classification for Cash?
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What is the normal balance for Drawing accounts?
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What is the increase side for the Capital account?
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What is the classification for Accounts Payable?
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Received cash will go under the ______ side of a Cash T account.
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Paid cash will go under the ______ side of a Cash T account.
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What occurs when a transaction is done on account?
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Sold services one part of the transaction would go under the ______ side of a Sales T account.
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Bought supplies one part would go under the ______ side of the Supplies T account.
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What does for personal use in a transaction indicate?
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Study Notes
Account Classifications
- Prepaid Insurance: Classified as an asset; increased by debits, decreased by credits; normal balance is debit.
- Sales: Classified under owner's equity; increased by credits, decreased by debits; normal balance is credit.
- Supplies: An asset; increased by debits, decreased by credits; normal balance is debit.
- Accounts Receivable (e.g., Tom Dayton): Classified as an asset; increased by debits, decreased by credits; normal balance is debit.
- Advertising Expense: Part of owner's equity; increased by debits, decreased by credits; normal balance is debit.
- Cash: Considered an asset; increased by debits, decreased by credits; normal balance is debit.
- Drawing (e.g., Barbara Casey): Classified as owner's equity; increased by debits, decreased by credits; normal balance is debit.
- Capital (e.g., Barbra Casey): An owner's equity account; increased by credits, decreased by debits; normal balance is credit.
- Accounts Payable (e.g., Emmer Supplies): Classified as a liability; increased by credits, decreased by debits; normal balance is credit.
Cash Transactions
- Received Cash: Debit the Cash T account; for example, a $9,000 investment from an owner is recorded as a debit in Cash and credit in Capital.
- Paid Cash: Credit the Cash T account; for instance, paying $600 for insurance credits Cash and debits Prepaid Insurance.
Accounting for Transactions
- On Account: Involves a debit to Accounts Payable when cash is paid; example: Paying $150 on account would debit Accounts Payable.
- Sold Services: Transactions that require crediting the Sales T account and debiting Accounts Receivable; e.g., $300 sold to Tom Dayton will credit Sales and debit Accounts Receivable.
- Bought Supplies: Necessitates debiting the Supplies account and crediting Accounts Payable; for example, buying supplies for $370 results in a debit to Supplies and credit to Accounts Payable.
Personal Transactions
- For Personal Use: Transactions affecting the Drawing account; paying the owner $600 for personal use debits the Drawing account and credits Cash.
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Description
Prepare for your Accounting Chapter 2 test with this comprehensive flashcard review. This quiz covers essential account classifications, including prepaid insurance and sales accounts, helping you understand the increase and decrease sides, as well as normal balances for each account type.
