Accounting - Recording Transactions

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Questions and Answers

What is the journal entry for purchasing equipment on November 2?

Equipment $1000; Cash $1000 (correct)

Cash $1000; Equipment $1000

Equipment $5000; Accounts payable $5000

Accounts payable $1000; Equipment $1000

What accounting entry is made when rent expense is paid on November 3?

Rent Expense $400; Accounts payable $400

Cash $400; Rent Expense $400

Accounts payable $500; Cash $500

Rent Expense $500; Cash $500 (correct)

What is recorded when cash is received from customers for repair services on November 4?

Revenues $400; Cash $400

Revenues $5100; Cash $5100

Cash $5100; Revenues $5100 (correct)

Accounts receivable $5100; Revenues $5100

What entry reflects the payment of a telephone expense on November 5?

Telephone Expense $2000; Cash $2000 Signup and view all the answers

What is the journal entry for providing services on account on November 6?

Accounts receivable $5000; Services Revenue $5000 Signup and view all the answers

What entry represents Tarek's cash withdrawal for personal use on November 7?

Withdrawals $500; Cash $500 Signup and view all the answers

What error is present in the journal entry recording the rent expense on November 3?

The amount should be $400, not $500 Signup and view all the answers

What is the significance of recording the equipment purchase on the first of November?

It reflects a capital investment in the business Signup and view all the answers

What does a debit represent in accounting?

An increase in assets Signup and view all the answers

Which transaction would be recorded as a credit?

Owner's capital investment Signup and view all the answers

In which case would an asset increase be recorded as a debit?

When a company purchases equipment with cash Signup and view all the answers

What is the purpose of journal entries?

To provide a detailed transaction record for accounting Signup and view all the answers

Which of the following is NOT a characteristic of a credit entry?

Increases expenses Signup and view all the answers

If cash is received for services rendered, this transaction affects which accounts?

Debit Cash, Credit Revenues Signup and view all the answers

When the owner withdraws cash from the business for personal use, what is the journal entry?

Debit Withdrawals, Credit Cash Signup and view all the answers

How would the purchase of equipment on account affect the accounting equation?

Assets increase, Liabilities increase Signup and view all the answers

Study Notes

Accounting - Recording Transactions

Dual Aspect of Accounting: Every transaction affects at least two accounts, with equal debits and credits.
Debit (DR): Represents increases in assets, expenses, and withdrawals, and decreases in liabilities and owners' equity. It comes from the word "debtor" and refers to what is owed.
Credit (CR): Represents increases in liabilities, owner's equity, and revenues, and decreases in assets. It comes from the word "creditor" and refers to something entrusted.
Debit Items: Include all assets, increases in assets, decreases in liabilities, expenses, and withdrawals.
Credit Items: Include liabilities, owners' equity, increases in liabilities, decreases in assets, and revenues.
Journal Entries: Detailed records of transactions, showing debits and credits for each account affected. Includes date, account titles, DR, and CR amounts.
Example Transactions (using examples from the documents):
- Investment of cash into a business increases cash and capital.
- Purchase of equipment with cash decreases cash and increases equipment.
- Providing services to customers increases cash and revenues.
- Withdrawal of cash by owner decreases cash and increases withdrawals.

Accounting Principles: Example Scenarios

Example 1 (Computer Programming Service):
- Ray invested $20,000 cash to start the business. This increased cash and capital.
- SoftByte purchased equipment for $8,000 cash. This decreased cash and increased equipment.
- SoftByte received $1,200 from clients for services. This increased cash and revenues.
- Ray withdrew $250 cash. This decreased cash and increased withdrawals.
Example 2 (Restaurant):
- Ahmed invested $10,000 to start Suchi restaurant. This increased cash and capital.
- Suchi purchased equipment on account for $5,000. This increased equipment and accounts payable.
- Suchi paid $400 cash for rent. This decreased cash and increased rent expense.
- Suchi received $5,100 cash from customers for meals. This increased cash and revenues.
- Suchi sold meals on account for $3,000. This increased accounts receivable and revenues.
Example 3 (Repair Shop):
- Perfect purchased equipment for $1,000 cash. This decreased cash and increased equipment.
- Perfect paid $500 cash for rent. This decreased cash and increased rent expense.
- Perfect received $5,100 cash from customers for services. This increased cash and revenues.
- Perfect paid $2,000 cash for telephone service. This decreased cash and increased telephone expense.

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Description

Test your knowledge on the fundamental concepts of accounting, specifically focusing on the dual aspect of accounting involving debits and credits. This quiz covers the classification of accounts, journal entries, and real-world examples. Ideal for anyone studying basic accounting principles.