Practice Multiple - Choice Questions

1. B 9. B
2. C 10.C
3. D 11.D
4. D 12.C
5. D 13.A
6. B 14.C
7. A 15.A
8. C
Brief Exercises
BE2.1

No Account (a) Debit effect (b) Credit effect (c) Normal balance
1 Accounts Payable. Decrease Increase Credit
2 Advertising Expense. Increase Decrease Debit
3 Service Revenue. Decrease Increase Credit
4 Accounts Receivable. Increase Decrease Debit
5 Share Capital—Ordinary. Decrease Increase Credit
6 Dividends. Increase Decrease Debit

BE2.2

June Account Debited Account Credited

1 Cash Oleg Thorn, Capital
2 Equipment Account Payable
3 Rent Expense Cash
12 Account Receivable Service Revenue

BE2.3

Account Titles and Explanation

Date Ref Debit Credit
Cash €5,000
1
Oleg Thorn, Share Capital €5,000
Equipment €3,600
2
Account Payable €3,600
Rent Expense €800
3
Cash €800
Account Receivable €400
12
Service Revenue €400

BE2.4
The basic steps in the recording process are:
 Step 1: Analyze each transaction in terms of its effect on the accounts. An
account is a record of increases and decreases in specific asset, liability, and owner's
equity items.
 Step 2: Enter the transaction information in a journal. Which account does this
transaction increases and decreases? And what amount of money is the increase
and decrease?
  Step 3: Transfer the journal information to the appropriate accounts in the ledger.
Apply the principle of recording on the account to determine the entry: which
account is recoreded “Debit” and which is recorded “Credit”?
BE2.5

Date (a)Effect on Accounting Equation (b) Debit- Credit Analysis

The assets cash is increased. The owner’s equity Debits increase assets: Debit cash $9,000.
1 account Gonzales SA , Owner’s Capital is Credits increase owner’s equity; Credit
increased. Gonzales SA , Owner’s Capital $9,000.
Debits increase assets: Debit prepaid
The assets Prepaid Insurance Is increased: ,the
4 insurance $2,100. Credits decrease assets:
asset cash is decreased
Credit cash $2,100.
Debits increase assets: Debit cash $3,600.
The assets cash is increased: the revenue Service
16 Credits increase revenue: Credit service
revenue is decreased.
revenue $3,600.
Debits increase expense: Debit salaries
The expense salaries Expense is increase: The
27 expenses $1,000. Credit decrease assets:
assets cash is decease.
Credit cash $1,000.

BE2.6

Date Account Titles and Explanation Ref Debit Credit

Cash $9,000
1
Owner’s Capital $9,000
Prepared Insurance $2,100
4
Cash $2,100
Cash $3,600
16
Service Revenue $3,600
Salary Expense $1,000
27
Cash $1,000

BE2.7

Dr Cash Cr
May 12 4,200
May 15 3,000
ED = 7,200
Dr Accounts Receivable Cr
May 5 5,400 May 12 4,200
ED = 1,200

Dr Service Revenue Cr
May 5 5,400
May 15 3,000
ED = 8,400

BE2.8
 Cash
Date Explanation Ref Debit Credit Balance
May 12 J1 4,200 4,200
May 15 J1 3,000 7,200

Service Revenue
Date Explanation Ref Debit Credit Balance
May 5 J1 5,400 5,400
May 15 J1 3,000 8,400

Accounts Receivable
Date Explanation Ref Debit Credit Balance
May 5 J1 5,400 5,400
May 12 J1 4,200 1,200

BE2.9

Trial Balance
Debit Credit
Cash $ 5800
Accounts Receivable $ 3000
Equipment $17,000
Accounts Payable $ 8100
Share Capital—Ordinary $15,000
Dividends $1,200
Service Revenue $ 10,000
Salaries and Wages Expense $5,100
Rent Expense $1,000
Total $33,100 $33,100

BE2.10

Trial Balance
Debit Credit
Cash £10,600
Prepaid Insurance £3,500
Accounts Payable £3,000
Unearned Service Revenue £2,200
Share Capital—Ordinary £9,000
Dividends £4,500
Service Revenue £25,400
Salaries and Wages Expense £18,600
Rent Expense £2,400
Total £39,600 £39,600

Exercises
E2.1
1. An account is an accounting record of either a specific asset or a specific liability.
 (False)
→an Asset, Liability, Owner's Equity, Revenue or Expense.
2. An account shows only increases, not decreases, in the item it relates to. (False)
→ Show both increases and decrease.
3. Some items, such as Cash and Accounts Receivable, are combined into one
account. (False)
→ No two accounts can be combined together.
4. An account has a left, or credit side, and a right, or debit side. (False)
→ a left, or dedit side, and a right, or crebit side.
5. A simple form of an account consisting of just the account title, the left side, and
the right side, is called a T-account. (True)

E2.2

Account Debited Account Credited

(d)
(a) Basic (b) Specific (a) Basic (b) Specific (d) Normal
Date (c) Effect Normal (c) Effect
Type Account Type Account Balance
Balance
Owner’s Owner’s
2 Asset Cash Increase Debit Increase Credit
Equity Capital
3 Asset Equipment Increase Debit Asset Cash Decrease Debit
Account
9 Asset Supplies Decrease Debit Liability Increase Credit
Payable
Account Owner’s
11 Asset Increase Debit Revenue Increase Credit
Receivable Equity
Owner’s Advertising
16 Increase Debit Asset Cash Decrease Debit
Equity Expense
Account
20 Asset Cash Increase Debit Asset Decrease Debit
Receivable
Account
23 Liability Decrease Credit Asset Cash Decrease Debit
Payable
Owner’s Owner’s
28 Increase Debit Asset Cash Decrease Debit
Equity Drawing

E2.4
Oct. 1
Cash HK$17,000
Owner’s capital HK$17,000

Oct.2: No entry
Oct.3:
Supplies HK$1,900
Accounts payable HK$1,900

Oct.6:
Accounts Receivable HK$3,800
Service Revenue HK$3,800
 Oct.27:
Accounts Payable HK$1,300
Cash HK$1,300

Oct.30
Salaries and Wages Expense HK$2,500
Cash HK$2,500

E2.5

Account Titles and

Date Ref Debit Credit
Explanation
Cash HK$17,000
1
Owner’s capital HK$17,000
2 No entry
Supplies HK$1,900
3
Accounts payable HK$1,900
Accounts Receivable HK$3,800
6
Service Revenue HK$3,800
Accounts Payable HK$1,300
27
Cash HK$1,300
Salaries and Wages HK$2,500
30 Expense
Cash HK$2,500

E2.7

Account Titles and

Ref Debit Credit
Explanation
Cash NT$40,000
1
Owner’s capital NT$40,000
Rent Expense NT$8,400
2
Cash NT$8,400
Account Receivable NT$52,000
3
Service Revenue NT$52,000
Retained Earning NT$7,500
4
Dividends NT$7,500

E2.8

Account Titles and

Date Ref Debit Credit
Explanation
Rent Expense $1,200
1
Cash $1,200
Accounts Receivable $160
3
Service Revenue $160
5 Cash $75 $75
 Account Titles and
Date Ref Debit Credit
Explanation
Service Revenue
Equipment $600
8 Cash $90
Account Payable $510
Accounts Receivable $160
12
Cash $160
Salaries and Wages $525
14 Expense
Cash $525
Utilities Expense $72
22
Cash $72
Cash $1,500
24
Note Payable $1,500
Repair Service Expense $220
27
Cash $220
Accounts Payable $510
28
Cash $510
Prepaid Insurance $1,800
30
Cash $1,800

E2.9

Date Account Titles and Explanation Ref Debit Credit

Cash $24,000
1
Owner’s Capital $24,000
Cash $7,000
2
Note Payable $7,000
Equipment $11,000
3
Cash $11,000
Rent Expense $1,200
4
Cash $1,200
Supplies Expense $1,450
5
Cash $1,450
Advertising Expense $600
6
Account Payable $600
Account Receivable $16,000
7 Cash $2,000
Service Revenue $18,000
Owner's Withdrawals $400
8
Cash $400
Utilities Expense $2,000
9
Cash $2,000
Account Payable $600
10
Cash $600
11 Interest Expense $40
Cash $40
Date Account Titles and Explanation Ref Debit Credit
Salaries and Wages Expense $6,400
12
Cash $6,400
Cash $12,000
13
Account Receivable $12,000

E2.11
a.

Dr Cash Cr
Aug 1 5,000 Aug 12 2,300
10 2,600
31 900
EB = 6,200
Dr Equipment Cr
Aug 12 5,000
EB = 5,000
Dr Notes Payable Cr
Aug 12 2,700
ED = 2,700
Dr Share Capital - Ordinary Cr
Aug 1 5,000
EB = 5,000
Dr Service Revenue Cr
Aug 10 2,600
Aug 25 1,700
EB = 4,300
Dr Accounts Receivable Cr
Aug 25 1,700 Aug 31 900
EB = 800

b.
Trial Balance
Debit Credit
Cash 6,200
Equipment 5,000
Notes Payable 2,700
Share Capital - Ordinary 5,000
Service Revenue 4,300
Accounts Receivable 800
Total 12,000 12,000

E2.13
 a.
Oct 1
Cash…………………………………3,000
Share Capital………………………… 3,000

Oct 10
Cash………………………………….750
Service Revenue…………………….. 750
Oct 10
Cash………………………………….4,000
Notes Payable……………………….. 4,000

Oct 20
Cash………………………………….500
Accounts Receivable………………… 500
Oct 20
Accounts Receivable…………………940
Service Revenue…………………….. 940
b.
Trial Balance
Debit Credit
Cash 7,200
Accounts Receivable 1,240
Supplies 400
Equipment 2,000
Notes Payable 4,000
Accounts Payable 500
Share Capital - Ordinary 5,000
Dividends 300
Service Revenue 2,490
Salaries and Wages Expense 500
Rent Expense 350
Total 11,990 11,990

E2.15

Error (a) In Balance (b) Difference (c) Larger Column

1 No $525 Debit
2 Yes
3 Yes
4 No $415 Credit
5 Yes
6 No $625 Debit

E2.17
 a.
Date Account Title Debit Credit
Cash $66,000
Oct. 1
Owner's Equity $66,000
Salary Expense $2,000
Oct. 2
Cash $2,000
Rent Expense $2,000
Oct. 4
Cash $2,000
Equipment $18,000
Oct. 7 Accounts Payable $14,000
Cash $4,000
Advertising Expense $500
Oct. 8
Cash $500
Equipment Repair Expense $390
Oct. 10
Accounts Payable $390
Accounts Receivable $3,200
Oct. 12
Service Revenue $3,200
Supplies $410
Oct. 16
Accounts Payable $410
Accounts Payable $14,000
Oct. 21
Cash $14,000
Utilities Expense $148
Oct. 24
Cash $148
Cash $3,200
Oct. 27
Accounts Receivable $3,200
Salary and Wages Expense $5,100
Oct. 31
Cash $5,100
 Problem
P2.3
a.

Date Account Tiltles and Explanation Debit Credit

Cash 40,000
May 1
Share Capital 40,000
May 2 No Entry
Prepaid Rent 24,000
May 3
Cash 24,000
Furniture and Equipment 30,000
May 4 Cash 10,000
Accounts Payable 20,000
Prepaid Insurance 1,800
May 5
Cash 1,800
Office Supplies 420
May 6
Cash 420
Office Supplies 1,500
May 7
Account Payable 1,500
 Date Account Tiltles and Explanation Debit Credit
Cash 8,000
May 8 Accounts Receivable 12,000
Revenue 20,000
Account Payable 400
May 9
Cash 400
Cash 3,000
May 10
Accounts Receivable 3,000
Utilities Expense 380
May 11
Utilities Payable 380
Salaries and wages expense 6,100
May 12
Cash 6,100

b.
Dr Cash Cr
May 1 40,000 24,000 May 3
8 8,000 10,000 May 5
10 3,000 1,800 May 6
400 May 9
6,100 May 12
EB = 8,280
Dr Share Capital Cr
40,000 May 1
EB = 40,000
Dr Prepaid Rent Cr
May 3 24,000
EB = 24,000
Dr Furniture and Equipment Cr
May 4 30,000
EB = 30,000
Dr Accounts Payable Cr
May 9 400 20,000 May 4
1,500 May 7
EB = 21,100
Dr Office Supplies Cr
May 6 420
May 7 1,500
EB = 1,920
Dr Accounts Receivable Cr
May 8 12,000 3,000 May 10
EB = 9,000
Dr Revenue Cr
 l 20,000 May 8
EB = 20,000
Dr Utilities Expense Cr
May 11 380
EB = 380
Dr Utilities Payable Cr
380 May 11
EB = 380
Dr Salaries and wages expense Cr
May 12 6,100
EB = 6,100

c.
Trial Balance
Account Tiltles Debit Credit
Cash 8,280
Share Capital 40,000
Prepaid Rent 24,000
Furniture and Equipment 30,000
Accounts Payable 21,100
Office Supplies 1,920
Accounts Receivable 9,000
Revenue 20,000
Utilities Expense 380
Utilities Payable 380
Salaries and wages expense 6,100
Total 81,480 81,480