Journal Entries
Easy Practice Test
Introduction to Accounting
Journal Entries
Easy Practice Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
1. A revenue account is credited this period when
a. services are provided to a customer this period
b. services are provided to the company this period
c. services are paid for this period and provided next period
d. income is earned last period
Check Your Answer
A. A revenue account is credited when it is increased. Revenues are recorded with an increase when the revenue is earned this period; a good or service has been provided this period. (b.) is an expense.
2. An expense account is debited this period when
a. services are provided to a customer this period
b. services are provided to the company this period
c. services will be paid for this period and provided next period
d. services will be provided to the company next period
Check Your Answer
B. Expense accounts are debited when they increase. A service provided to the company this period is an increase in to the expense this period.
3. What is recorded when wages are paid to employees who worked this period?
a. a debit to an asset and a credit to a liability
b. a credit to a revenue and a debit to an asset
c. a debit to an expense and a credit to an asset
d. a debit to a liability and a credit to a revenue
Check Your Answer
C. Wages paid to employees who worked this period is an increase to an expense and a decrease to cash. Increasing an expense is a debit and decreasing cash, an asset, is a credit.
4. Dividends earned and not yet received are recorded with
a. a debit to an asset and a credit to a liability
b. a credit to a revenue and a debit to an asset
c. a debit to an expense and a credit to an asset
d. a debit to a liability and a credit to cash
Check Your Answer
B. Earned means it is a revenue. Revenues increase with a credit. Not yet received is a receivable which is an asset. Assets increase with a debit.
5. Using up prepaid rent is recorded with
a. a credit to a liability
b. a debit to an expense
c. a credit to an expense
d. a debit to an asset
Check Your Answer
B. Using up the asset prepaid rent is an expense. An increase to an expense is recorded with a debit. Using an asset is also a decrease to the asset which is recorded with a credit. This is not one of the choices.
6. Cash paid for salaries owed to employees for working last month is
recorded with
a. a debit to a liability
b. a credit to an expense
c. a credit to a revenue
d. a debit to an expense
Check Your Answer
A. Paying for an amount owed is a decrease to cash and a decrease to the liability. Assets are decreased with a credit and liabilities are decreased with a debit. The expense was recorded last period with a debit when the service was provided.
7. Depreciation expense is recorded in the same transaction as
a. a credit to equipment
b. a credit to accumulated depreciation
c. a credit to accrued expenses
d. a credit to prepaid expenses
Check Your Answer
B. Accumulated depreciation is the account that is always credited when recording depreciation expense. This account is the total of all prior years’ depreciation expense. Accumulated depreciation is a contra asset account which means it is opposite of an asset. Assets increase with a debit, so accumulated depreciation is increased with a credit (opposite).
8. An increase to an expense will be recorded in the same transaction with
a. a credit to a liability
b. a debit to a liability
c. a credit to a revenue
d. a credit to owner’s equity
Check Your Answer
A. The expense must be paid for now or paid for later. The expense is a debit, so the other account must be a credit. Payment now decreases the asset cash. Decreasing an asset is done with a credit which is not one of the choices. Paying later increases a liability which is done with a credit (b). A revenue and expense is not recorded together in the same journal entry.
9. The company issued stock to investors. Which of the following is done to record this transaction?
a. credit owner’s equity and debit retained earnings
b. debit an asset and credit an asset
c. credit an assets and debit a liability
d. debit an asset and credit owner’s equity
Check Your Answer
D. Issuing stock to investors increases cash, recorded with a debit, and increases common stock, recorded with a credit.
10. The company purchases a truck and pays cash. Which of the following is done to
record this transaction?
a. debit cash and credit truck
b. debit truck and credit accounts payable
c. debit truck and credit cash
d. debit truck expense and credit cash
Check Your Answer
C. Truck increases and cash decreases. Both are assets. The truck increases with a debit and the cash decreases with a credit.
11. Journal entries are used for the purpose of
a. recording transactions only
b. recording and summarizing transactions
c. determining if the accounting equation balances
d. listing all the account names used
Check Your Answer
A. Journal entries are made to record transactions. T accounts summarize transactions to get account balances that are reported on the financial statements. Recording debits and credits properly will balance the accounting equation (c.) A trial balance lists all account names used
12. Which of the following transactions requires a credit to a liability account?
a. purchase an asset and pay cash
b. purchase an asset and agree to pay later
c. issue common stock
d. repay a liability
Check Your Answer
B. A credit to a liability account is an increase. An increase to a liability occurs when the company borrows to purchase an asset and pays later. Repaying a liability is a debit to the liability (d.) (a. & c.) do not impact a liability.
13. The account name debited when the company pays a supplier is
a. accounts receivable
b. accounts payable
c. supplies
d. cash
Check Your Answer
B. Owing a supplier is called accounts payable. Cash is credited when payment is made. Accounts payable is debited.
14. The account name debited when the company collects from a customer is
a. cash
b. accounts payable
c. accounts receivable
d. none of the above
Check Your Answer
A. Amounts owed from the customer is accounts receivable. The customer pays cash to the company. Cash is increased (debit) and accounts receivable is decreased (credit); both are assets.
15. Account names that will not be used to record the same transaction are
a. cash and accounts receivable
b. cash and inventory
c. accounts receivable and accounts payable
d. accounts payable and cash
Check Your Answer
C. The company can not owe someone and be owed as a result of the same transaction. The other choices are cash being paid or collected, which are common transactions.
16. Record journal entries for following transactions. After recording the transactions,
prepare a “T account” and balance the cash account.
a. Issued stock to investors for $125,000 cash
b. Purchased office furniture for $3,200, agree to pay the entire amount in 2 years.
c. Purchased computers for the office for $1,200 cash
d. Paid for rent for the next 3 months, $600
e. Purchased office supplies for $75 cash
f. Purchased inventory on account for $15,000
g. Paid $11,000 to the supplier for the inventory purchased in f.
h. Hired employees who will begin work in 2 weeks
i. Borrowed $10,000 from the bank to be repaid in 6 months
j. Loaned $2,500 to a company who agrees to repay it in 2 years
Check Your Answer
a.
Cash 125,000
Common Stock 125,000
Asset – Increase – Debit
Owner’s Equity – Increase – Credit
b.
Office Furniture 3,200
L/T Notes Payable 3,200
Asset – Increase – Debit
Liability – Increase – Credit
c.
Computers 1,200
Cash 1,200
Asset – Increase – Debit
Asset – Decrease – Credit
d.
Prepaid Rent 600
Cash 600
Asset – Increase – Debit
Asset – Decrease – Credit
e.
Office Supplies 75
Cash 75
Asset – Increase – Debit
Asset – Decrease – Credit
f.
Inventory 15,000
Accounts Payable 15,000
Asset – Increase – Debit
Liability – Increase – Credit
g.
Accounts Payable 11,000
Cash 11,000
Liability – Decrease – Debit
Asset – Decrease – Credit
h.
No entry recorded, no exchange has taken place
i.
Cash 10,000
S/T Notes Payable 10,000
Asset – Increase – Debit
Liability – Increase – Credit
j.
L/T Notes Receivable 2,500
Cash 2,500
Asset – Increase – Debit
Asset – Decrease – Credit
17. Record journal entries for the following transactions. After recording the
transactions, prepare a “T account” and balance the accounts payable account.
a. Borrowed $50,000 from the bank, agreed to repay it in 3 years
b. Purchased manufacturing equipment for $20,000 cash
c. Purchased office furniture on account, $2,700
d. Paid for insurance for the next 6 months, $2,200
e. Repaid $10,000 of the amount borrowed from the bank
f. Purchased inventory on account, $15,000
g. Purchased supplies for cash, $100
h. Paid the supplier $14,000 for inventory purchased on account
i. Invested $3,000 in a short term investment
j. Sold part of the company to investors for $50,000 cash
Check Your Answer
a.
Cash 50,000
L/T Notes Payable 50,000
Asset – Increase – Debit
Liability – Increase – Credit
b.
Manufacturing Equipment 20,000
Cash 20,000
Asset – Increase – Debit
Asset – Decrease – Credit
c.
Office Furniture 2,700
Accounts Payable 2,700
Asset – Increase – Debit
Liability – Increase – Credit
d.
Prepaid Insurance 2,200
Cash 2,200
Asset – Increase – Debit
Asset – Decrease – Credit
e.
L/T Notes Payable 10,000
Cash 10,000
Liability – Decrease – Debit
Asset – Decrease – Credit
f.
Inventory 15,000
Accounts Payable 15,000
Asset – Increase – Debit
Liability – Increase – Credit
g.
Supplies 100
Cash 100
Asset – Increase – Debit
Asset – Decrease – Credit
h.
Accounts Payable 14,000
Cash 14,000
Liability – Decrease – Debit
Asset – Decrease – Credit
i.
S/T Investment 3,000
Cash 3,000
Asset – Increase – Debit
Asset – Decrease – Credit
j.
Cash 50,000
Common Stock 50,000
Asset – Increase – Debit
Owner’s Equity – Increase – Credit
18. A company had the following transactions during the first month of operations. Record journal entries for these transactions. Determine the balance in the cash account at the end of the first month.
a. Received $150,000 cash from investors for ownership in the company.
b. Purchased inventory to be sold to customers, $45,000 on account.
c. Rented warehouse space, $6,000 was paid for this month.
d. Sold $5,000 of inventory on account (you have not been paid yet), sales price of $7,500.
e. Acquired office furniture for $3,000 cash
f. Paid $12,000 to employees who worked this month.
g. Acquired manufacturing equipment costing $39,000, paid cash.
h. Paid $700 for janitorial service.
i. Received a $100 utility bill for this month.
j. Collected $7,500 owed from customers.
Check Your Answer
a.
Cash 150,000
Common Stock 150,000
Asset – Increase – Debit
Owner’s Equity – Increase – Credit
b.
Inventory 45,000
Accounts Payable 45,000
Asset – Increase – Debit
Liability – Increase – Credit
c.
Rent Expense 6,000
Cash 6,000
Expense – Increase – Debit
Asset – Decrease – Credit
d.
Accounts Receivable 7,500
Sales 7,500
Cost of Goods Sold 5,000
Inventory 5,000
Asset – Increase – Debit
Revenue – Increase – Credit
Expense – Increase – Debit
Asset – Decrease – Credit
e.
Office Furniture 3,000
Cash 3,000
Asset – Increase – Debit
Asset – Decrease – Credit
f.
Salary Expense 12,000
Cash 12,000
Expense – Increase – Debit
Asset – Decrease – Credit
g.
Manufacturing Equipment 39,000
Cash 39,000
Asset – Increase – Debit
Asset – Decrease – Credit
h.
Cleaning Expense 700
Cash 700
Expense – Increase – Debit
Asset – Decrease – Credit
i.
Utility Expense 100
Accounts Payable 100
Expense – Increase – Debit
Liability – Increase – Credit
j.
Cash 7,500
Accounts Receivable 7,500
Asset – Increase – Debit
Asset – Decrease – Credit
