Chapter 3

Question 1

Normal balance of Assets

Answer 1

Assets have normal Debit balance

Question 2

Normal balance of Liabilities

Answer 2

Liabilities have normal Credit balance

Question 3

Normal balance of Common Stock

Answer 3

Common stock has normal Credit balance

Question 4

Normal balance of Retained Earnings

Answer 4

Retained Earnings has normal Credit balance

Question 5

Normal balance of Dividends

Answer 5

Dividends has normal Debit balance

Question 6

Normal balance of Revenues

Answer 6

Revenue has normal Credit balance

Question 7

Normal balance of Expenses

Answer 7

Expense has normal Debit balance

Question 8

2 kinds of adjusting entry (deferrals)

Answer 8

• Prepaid Expenses

- Unearned revenues

Question 9

2 kinds of adjusting entry (accrual)

Answer 9

• Accrued Revenues

- Accrued expenses

Question 10

Prepaid expenses

Answer 10

Expense that has been paid in cash before it has been used or consumed

Question 11

Unearned revenues

Answer 11

Cash received before performance obligation has been met

Question 12

Accrued revenues

Answer 12

Revenue for services has been performed but not yet received in cash or recorded

Question 13

Accrued expenses

Answer 13

Expenses incurred but not yet paid in cash or recorded

Question 14

Normal balance of Allowance for Doubtful Accounts

Answer 14

Although Allowance for Doubtful Accounts is listed under assets, it has a normal Credit balance b/c it’s a contra-asset account