Journal Entries
Self Test
Self Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
1. You will often record that the company
a. paid for something and paid for something else
b. received something and received something else
c. gave up something to received something
d. received something and never gave up anything for it
b. received something and received something else
c. gave up something to received something
d. received something and never gave up anything for it
Check Your Answer
C. A journal entry records a transaction. A transaction will always be an exchange of something for something else. The company receives something and gives something
2. When a company buys land and agrees to pay for it in 2 years
a. an asset is debited and an asset is credited
b. a liability is debited and an asset is debited
c. an asset is debited and owners equity is credited
d. an asset is debited and a liability is credited
b. a liability is debited and an asset is debited
c. an asset is debited and owners equity is credited
d. an asset is debited and a liability is credited
Check Your Answer
D. A journal entry must always have equal debits and credits. The answer must contain a debit and a credit. The asset land increases with a debit. The company now owes more and the liability notes payable increases with a credit.
3. Issuing stock to investors is recorded with
a. a debit to cash and a credit to common stock
b. a debit to cash and a credit to owner’s payable
c. a credit to cash and a debit to owners equity
d. a credit to cash and a debit to common stock
b. a debit to cash and a credit to owner’s payable
c. a credit to cash and a debit to owners equity
d. a credit to cash and a debit to common stock
Check Your Answer
A. In this transaction, the company increases cash and increases common stock. The asset cash is increased with a debit and the owner’s equity common stock is increased with a credit. Owner’s payable is not an account (b.). (c.) occurs when the company purchases its own stock. (d.) will never occur.
4. Repaying a liability that was agreed to in the past will be recorded with a
a. debit to cash and a credit to the liability
b. a credit to cash and a debit to the liability
c. a credit to the liability and a debit to owner’s equity
d. a debit to an asset and a credit to the liability
b. a credit to cash and a debit to the liability
c. a credit to the liability and a debit to owner’s equity
d. a debit to an asset and a credit to the liability
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B. Cash and the liability both decrease. The liability is decreased with a debit and cash is decreased with a credit. (a.) occurs when cash is borrowed. (c.) will not occur.
(d.) occurs when cash is borrowed or an asset is purchased on credit.
(d.) occurs when cash is borrowed or an asset is purchased on credit.
5. Cash collected from a customer who owes the company will be recorded with a
a. debit to cash and a credit to accounts payable
b. a credit to cash and a debit to accounts receivable
c. a debit to cash and a debit to accounts receivable
d. a debit to cash and a credit to accounts receivable
b. a credit to cash and a debit to accounts receivable
c. a debit to cash and a debit to accounts receivable
d. a debit to cash and a credit to accounts receivable
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D. Cash increases and is recorded with a debit. Accounts receivable decreases with a credit. Assets increase with a debit and decrease with a credit. (a.) will not occur since a company does not get cash from a supplier. (b.) will not occur because cash does not decrease when the customer owes for goods/services. You will never have two debits in a journal entry without a credit. All journal entries require at least one debit and one credit.
6. The account that is used most often vmen recording transactions is
a. cash
b. retained earnings
c. accounts receivable
d. inventory
b. retained earnings
c. accounts receivable
d. inventory
Check Your Answer
A. Cash is used when something is received from earning revenues and when assets are paid for or liabilities are reduced. Cash is used when you see the word “paid” or “received” or Mcollected’. Accounts receivable and inventory are used primarily in two situations. Retained earnings is used for dividends paid and closing entries.
7. A transaction that will not occur is
a. a debit to an asset and a credit to an asset
b. a debit to an asset and a credit to a liability
c. a credit to a liability and a credit to an asset
d. a credit to owner’s equity and a debit to an asset
b. a debit to an asset and a credit to a liability
c. a credit to a liability and a credit to an asset
d. a credit to owner’s equity and a debit to an asset
Check Your Answer
C. You can not increase a liability and decrease an asset. This is two credits and the journal entry will not balance. This also makes the accounting equation out of balance. All others keep the accounting equation in balance. (a.) is exchanging one asset for another. (b.) is receiving an asset and paying for it later. (d.) occurs when stock is issued to investors.
8. When recording a journal entry you always
a. write expenses as negative amounts
b. write the account name of a debit on the bottom of the journal entry
c. write the account name of a credit on the bottom of the journal entry
d. equal to increases in equity
b. write the account name of a debit on the bottom of the journal entry
c. write the account name of a credit on the bottom of the journal entry
d. equal to increases in equity
Check Your Answer
C. Journal entries are written with the debit on the top and the credit on the bottom slightly indented. All amounts are written beside the account name with a positive number.
9. The total amount of debits in the debit column for an asset represents
a. what the company had at the beginning of the year
b. the total increases to the asset
c. the total decreases to the asset
d. what the company had at the end of the year
b. the total increases to the asset
c. the total decreases to the asset
d. what the company had at the end of the year
Check Your Answer
B. Debits to an asset (left/top) represents increases. Total debits will equal the total amount of increases to the asset. Decreases are a credit (right/bottom)
The beginning and ending balance of an asset will always be a debit.
The beginning and ending balance of an asset will always be a debit.
10. When recording transactions in a journal entry you must
a. keep the accounting equation in balance with each transaction
b. make sure total debits equal total credits
c. write the debit on top and the credit on the bottom
d. all of the above
b. make sure total debits equal total credits
c. write the debit on top and the credit on the bottom
d. all of the above
Check Your Answer
D. When writing a journal entry you write the debit on top and the credit on bottom. Total debits must equal total credits, which will keep the accounting equation in balance.
11. When you record a debit to an asset you may also
a. record a debit to a liability for the same amount
b. record a debit to an expense for the same amount
c. record a debit to an owner’s equity account for the same amount
d. record a credit to another asset for the same amount
b. record a debit to an expense for the same amount
c. record a debit to an owner’s equity account for the same amount
d. record a credit to another asset for the same amount
Check Your Answer
D. A debit to an asset increases the asset. You must keep the accounting equation in balance so you must also decrease an asset (with a credit) or increase a liability or owner’s equity (with a credit). Crediting a liability or owner’s equity not listed. Each
journal entry must have at least one debit and one credit.
journal entry must have at least one debit and one credit.
12. A company should record rent paid for this period’s use with a
a. a credit to rent revenue
b. a debit to rent expense
c. a credit to rent expense
d. a debit to prepaid rent
b. a debit to rent expense
c. a credit to rent expense
d. a debit to prepaid rent
Check Your Answer
B. Rent paid for this period is an expense. Increasing an expense is done with a debit to rent expense. The company is paying for a service provided in this period and this is an expense this period. Credits decrease the expense (c.) and it is not an asset if it is used this period (d.)
13. The revenue account that is credited when services are provided to customers is
a. unearned revenue
b. deferred revenues
c. service fees
d. service expense
b. deferred revenues
c. service fees
d. service expense
Check Your Answer
C. Providing services to customers is a revenue. Fees is another word for revenue. Unearned revenue and deferred revenues are liabilities.
14. When recording an increase to revenue you will also record
a. a debit to an asset
b. a credit to a liability
c. a credit to common stock
d. a debit to a prepaid
b. a credit to a liability
c. a credit to common stock
d. a debit to a prepaid
Check Your Answer
A. Increases to revenue are done with a credit to the revenue account. To keep the journal entry in balance you must also use a debit. Revenues are provided in exchange for an asset. A debit to an asset records the increase in the asset received.
15. When recording an increase to an expense, you will also record
a. a debit to an asset
b. a credit to a liability
c. a credit to common stock
d. a debit to a prepaid
b. a credit to a liability
c. a credit to common stock
d. a debit to a prepaid
Check Your Answer
B. Increases in expenses are recorded with a debit. To keep the journal entry in balance you must also use a credit. The expense is either paid for, a credit to cash, or is owed, a credit to a liability.
16. When a company is provided a service, the company will
a. credit expenses and debit assets
b. credit revenues and credit liabilities
c. credit expenses and credit liabilities
d. debit expenses and credit an asset
b. credit revenues and credit liabilities
c. credit expenses and credit liabilities
d. debit expenses and credit an asset
Check Your Answer
D. Being provided a service is an increase in an expense. Expenses increase with a debit. To keep the journal entry in balance you must also use a credit. The expense is either paid for now or is owed for. Paid for now is a credit to cash, an asset, and owed for is a credit to a liability. A journal entry can not have only two credits.
17. Using supplies will result in
a. a debit to supplies expense
b. a credit to supplies expense
c. a debit to prepaid supplies
d. a credit to accrued expenses
b. a credit to supplies expense
c. a debit to prepaid supplies
d. a credit to accrued expenses
Check Your Answer
A. Using up an asset is an expense. Expenses increase with a debit.
18. The journal entry recorded when goods are provided to customers on account is a
a. debit accounts payable and credit service fees
b. debits to accounts receivable and sates and credits to inventory and cost of goods sold
c. debits to accounts receivable and cost of goods sold and credits to inventory and sales
d. debit to accounts receivable and credit to sales
b. debits to accounts receivable and sates and credits to inventory and cost of goods sold
c. debits to accounts receivable and cost of goods sold and credits to inventory and sales
d. debit to accounts receivable and credit to sales
Check Your Answer
C. This is recorded with a debit to accounts receivable and a credit to sales for the price to the customer. You also record a debit to cost of goods sold (expense) and a credit to inventory that is used up when provided to the customer. Two separate things occur: 1) The customer is provided goods and owes the company and 2) the inventory is used up when it is given to the customer. An asset, accounts receivable increases with a debit. A revenue, called sales, increases With a credit. An expense, called cost of goods sold, is incurred and recorded with a debit. Inventory decreases, credit.
19. Receiving a service and paying for it in the future results in
a. a debit to a receivable account and a credit to sales
b. a credit to an expense and a credit to a liability account
c. a debit to an expense and credit to a liability
d. a credit to sales and a debit to accounts payable
b. a credit to an expense and a credit to a liability account
c. a debit to an expense and credit to a liability
d. a credit to sales and a debit to accounts payable
Check Your Answer
C.Receiving a service is an expense. Expenses increase with a debit. Paying later is a liability. liabillties increase with a credit. You must use a debit and a credit.
20. When an expense is incurred and recorded With a debit, the other account that may be credited is
a. an asset account
b. an owner’s equity account
c. a revenue account
d. an investment account
b. an owner’s equity account
c. a revenue account
d. an investment account
Check Your Answer
A. Expenses are either paid for now or paid for later. Paying now reduces cash. Reducing cash is recorded with a credit. Paying later increases a liability, credit (not one of the choices).