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Questions and Answers
Which of the following accounts is affected when a company buys equipment on credit?
When a customer makes a payment on their account, what is the effect on the Accounts Receivable account?
How is the owner's drawing account affected when the owner withdraws cash from the business?
When a company pays a supplier for goods or services previously purchased on account, which account is credited?
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What is the result when the Supplies Inventory account is debited instead of the Supplies Expense account?
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What is the primary function of the general ledger in the accounting process?
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In a trial balance, what account would an increase in Accounts Payable be recorded in?
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What is the purpose of a chart of accounts?
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Which account is debited when recording a payment received from a customer?
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In double-entry accounting, which accounts are used to record a purchase of supplies on credit?
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In a T-account for Accounts Receivable, where are credit entries recorded?
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Which accounting principle states that transactions should be recorded in the appropriate time period?
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What is the purpose of a chart of accounts?
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If a credit entry of $2,000 was incorrectly posted as a debit, what would be the difference in the trial balance?
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In a transaction where a company repaid a $500,000 bank loan, what would be the effect on total assets and total liabilities?
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If Accounts Payable has a debit entry of $85,000 and a credit entry of $120,000, with a normal ending balance of $235,000, what was the beginning balance?
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In the transaction where a $100,000 machine was purchased, with a $20,000 down payment and a note issued for the balance, what accounts would be credited?
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Study Notes
Equipment Purchase on Credit
- When a company buys equipment on credit, the Equipment account is debited and Accounts Payable is credited.
Customer Payment Effect
- A customer payment leads to a decrease in the Accounts Receivable account, reflecting that the customer owes less money.
Owner's Drawing Account
- The owner's drawing account is debited when the owner withdraws cash from the business, reducing equity.
Supplier Payment Transaction
- When a company pays a supplier for previously purchased goods or services on account, the Accounts Payable account is credited.
Supplies Inventory vs. Supplies Expense
- Debiting Supplies Inventory instead of Supplies Expense results in an increase in inventory on hand, delaying the recognition of expenses.
General Ledger Function
- The general ledger serves to organize all financial transactions of a company, providing a consolidated view of account balances.
Trial Balance - Accounts Payable
- An increase in Accounts Payable is recorded in the liability section of the trial balance.
Purpose of Chart of Accounts
- The chart of accounts provides a systematic list of all account titles used within an organization for efficient financial tracking.
Payment Received from Customer
- The Cash account is debited when recording a payment received from a customer, representing an increase in cash assets.
Double-Entry Accounting Supplies Purchase
- In double-entry accounting, a purchase of supplies on credit involves debiting Supplies Expense and crediting Accounts Payable.
T-Account Credit Entries
- In a T-account for Accounts Receivable, credit entries are recorded on the right side, indicating money received or payment settled.
Accounting Principle - Time Period
- The Recognized Accounting Principle mandates that transactions must be recorded in the appropriate accounting period they occur.
Incorrect Credit/Debit Posting Impact
- If a $2,000 credit is incorrectly posted as a debit, the trial balance will show a discrepancy of $4,000, incorrect in reflecting financial position.
Bank Loan Repayment Consequences
- Repaying a $500,000 bank loan decreases total assets by $500,000 and reduces total liabilities by $500,000, maintaining balance.
Beginning Balance Calculation
- If Accounts Payable has a debit of $85,000 and a credit of $120,000 with a normal ending balance of $235,000, the beginning balance was $300,000.
Machine Purchase Account Impact
- In the purchase of a $100,000 machine, with a $20,000 down payment, the remaining balance is recorded by crediting Notes Payable for $80,000.
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Description
Test your knowledge on prepaid expenses, chart of accounts, account classification, and accounting terminology with this quiz. Identify the differently classified account title, understand where a chart of accounts begins, and more.
