Debits and Credits

Question 1

In double-entry bookkeeping every accounting entry has an opposite corresponding entry in a different account.

True or False?

Answer 1

True.

Debits and credits represent the duality or double-sided nature of financial transactions.

In any particular transaction: Total debits = total credits

There may be two or more entries but this rule is always true.

Question 2

Credits are good and Debits are bad.

True or False?

Answer 2

False.

Debits and credits are neither good nor bad.

They are simply words we use to reflect the double-sided nature of transactions.

Question 3

Debits and Credits are equivalent to adding and subtracting.

True or False?

Answer 3

False.

Context is key to determining whether debits and credits represent positive or negative numbers in a given
Situation.

Question 4

Debits go on the ______ side of an account.

1. Left
2. Right

Answer 4

1. Left

Debits are typically shown on the left hand side of an account.

Question 5

Credits go on the ______ side of an account.

1. Left
2. Right

Answer 5

2. Right

Credits are typically shown on the right hand side of an account.

Question 6

The “E” on the RIGHT side of “DEALER” stands for…

1. Equity
2. Expenses

Answer 6

1. Equity

             DEALER  "Left Side"        "Right Side"   DEA                      LER -Dividends           -Liabilities -Expenses            -Equity -Assets                 -Revenue

Question 7

Which of these are normal Debit accounts?

1. Liabilities, Equity and Revenue
2. Dividends, Expenses and Assets

Answer 7

2. Dividends, Expenses and Assets

Question 8

Debits increase the balance of which accounts?

1. Liabilities, Equity and Revenue
2. Dividends, Expenses and Assets

Answer 8

2. Dividends, Expenses and Assets

Question 9

Debits decrease the balance of which accounts?

1. Liabilities, Equity and Revenue
2. Dividends, Expenses and Assets

Answer 9

1. Liabilities, Equity and Revenue

Question 10

Credits increase the balance of which accounts?

1. Liabilities, Equity and Revenue
2. Dividends, Expenses and Assets

Answer 10

1. Liabilities, Equity and Revenue

Question 11

Financial transactions involve a flow of economic benefit from a source to a destination. Credits represent the destination.

True or False?

Answer 11

False.

Question 12

An increase in the balance of a cash account is represented by a ______.

1. Debit
2. Credit

Answer 12

1. Debit

Question 13

A decrease in the balance of accounts receivable is represented by a ______.

1. Debit
2. Credit

Answer 13

2. Credit

Question 14

A decrease in the balance of accounts payable is represented by a ______.

1. Debit
2. Credit

Answer 14

1. Debit

Question 15

Property, Plant & Equipment is a ______.

1. Normal debit account
2. Normal credit account

Answer 15

1. Normal debit account

Question 16

Which of these accounts is an example of a contra asset?

1. Depreciation expense
2. Accumulated depreciation

Answer 16

2. Accumulated depreciation

Question 17

The entry to Accumulated Depreciation when a fixed asset is depreciated is a ______.

1. Debit
2. Credit

Answer 17

2. Credit

Question 18

Accrued Expense is a ______.

1. Normal Debit account
2. Normal Credit account

Answer 18

2. Normal Credit account

Question 19

An increase in Owner’s Equity is represented by a ______.

1. Debit
2. Credit

Answer 19

2. Credit

Question 20

The Dividend account is _______ when profits are distributed back to the shareholders of a business.

1. Debited
2. Credited

Answer 20

1. Debited

Question 21

Revenue is a ______.

1. Normal Debit account
2. Normal Credit account

Answer 21

2. Normal Credit account

Question 22

A decrease in Deferred Revenue is represented by a ______.

1. Debit
2. Credit

Answer 22

1. Debit

Question 23

An increase in Accrued Revenue is represented by a ______.

1. Debit
2. Credit

Answer 23

1. Debit

Question 24

An increase in Cost of Goods Sold is represented by a ______.

1. Debit
2. Credit

Answer 24

1. Debit

Question 25

Prepaid Expenses is a ______.

1. Normal Debit Account
2. Normal Credit Account

Answer 25

1. Normal Debit Account

Prepaid expenses is an Adjusting Entry Account. it is different to Expense Accounts which are held in the Income Statement.

Prepaid Expenses are future expenses that have been paid for in advance. it is a type of asset held in the balance sheet.

Assets represents the “A” on the left side of “DEALER” which means that they are normal Debit accounts.