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Questions and Answers
Which of the following accounts is affected when a company buys equipment on credit?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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.
