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?

<p>Telephone Expense $2000; Cash $2000 (D)</p> Signup and view all the answers

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

<p>Accounts receivable $5000; Services Revenue $5000 (D)</p> Signup and view all the answers

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

<p>Withdrawals $500; Cash $500 (C)</p> Signup and view all the answers

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

<p>The amount should be $400, not $500 (B)</p> Signup and view all the answers

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

<p>It reflects a capital investment in the business (C)</p> Signup and view all the answers

What does a debit represent in accounting?

<p>An increase in assets (C)</p> Signup and view all the answers

Which transaction would be recorded as a credit?

<p>Owner's capital investment (B)</p> Signup and view all the answers

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

<p>When a company purchases equipment with cash (A)</p> Signup and view all the answers

What is the purpose of journal entries?

<p>To provide a detailed transaction record for accounting (C)</p> Signup and view all the answers

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

<p>Increases expenses (B)</p> Signup and view all the answers

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

<p>Debit Cash, Credit Revenues (D)</p> Signup and view all the answers

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

<p>Debit Withdrawals, Credit Cash (B)</p> Signup and view all the answers

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

<p>Assets increase, Liabilities increase (B)</p> Signup and view all the answers

Flashcards

Debit

An increase in assets (what a business owns) or a decrease in liabilities (what a business owes). It is also used to record expenses and owner withdrawals.

Credit

An increase in liabilities or owner's equity, which is the owner's investment in the business. It is also used to record revenues.

Journal

A record of every financial transaction that occurs in a business. It includes a date, the accounting title, the debit amount, and the credit amount.

Journal Entry

A formal record of a financial transaction, detailing the date, the account affected, and the debit and credit amounts.

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Journalizing

The process of recording financial transactions in a journal. This process helps to track all financial activity and maintain accurate financial records.

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Capital

The initial cash investment made by an owner to start a business.

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Account Balance

The difference between the debit and credit sides of an account. It must always equal zero. For example, the debit side of an account may show $100,000 and the credit side may show $100,000. The balance is $0.

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Withdrawals

This happens when the owner takes money from a business for personal use.

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Journal Entry for Owner's Investment

The account debited represents the increase in assets, while the account credited represents the increase in owner's equity. This entry reflects an investment made by the owner.

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Journal Entry for Purchase of Equipment on Account

The account debited represents the increase in assets, while the account credited represents the increase in liabilities. This entry reflects the acquisition of equipment financed by an obligation to pay later.

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Journal Entry for Rent Expense

The account debited represents the expense incurred for rent, and the account credited represents the decrease in cash. This entry reflects the payment of rent.

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Journal Entry for Cash Received From Customers

The account debited represents the increase in cash, while the account credited represents the increase in revenue. This entry reflects the receipt of cash from customers for providing a service.

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Journal Entry for Services Provided on Account

The account debited represents the increase in accounts receivable, which is a claim on the customer. The account credited represents the increase in revenue. This entry reflects the provision of services on account, where customers owe the business money.

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Journal Entry for Telephone Expense

The account debited represents the expense incurred for telephone service, and the account credited represents the decrease in cash. This entry reflects the payment of a telephone bill.

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Journal Entry for Services Provided on Account

The account debited represents the increase in accounts receivable, which is a claim on the customer. The account credited represents the increase in revenue. This entry reflects the provision of services on account, where customers owe the business money.

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Journal Entry for Owner's Withdrawal

The account debited represents the decrease in owner's equity, while the account credited represents the decrease in cash. This entry represents the withdrawal of funds from the business for personal use.

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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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Related Documents

Accounting Journal Entries PDF

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.

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