Module 2: Recording Transactions

Assets and expenses [BLANK 1] with a debit and [BLANK] with a credit, while liabilities, equity, and revenue [BLANK] with a credit and [BLANK] with a debit.

1) increase 2) decrease 3) increase 4) decrease

Which of the following accounts is increased by a credit? A. Inventory B. Cost of Goods Sold (COGS) C. Deferred Revenue D. Cash

C. CORRECT

PROPERTY, PLANT & EQUIPMENT decreases with a Debit Credit

CREDIT is correct Assets decrease with a credit

RETAINED EARNINGS increases with a Debit Credit

CREDIT is correct. Owners' Equity increases with a credit.

Which of the following is TRUE regarding journal entries: A) There are always only two accounts affected B) The total amount debited must equal the total amount credited C) Journal entries show debits on the right and credits on the left D) Journal entries show credits first, then debits

A) INCORRECT At least two accounts will be affected, possibly more. B) CORRECT Total debits MUST equal total credits. C) INCORRECT Debits are on the left and credits are on the right. D) INCORRECT Debits are shown first, followed by credits.

Which of the following accounts increase with a debit? Select all that apply. A. Cash B. Depreciation Expense C. Prepaid Rent D. Sales Revenue E. Deferred Revenue

A. CORRECT Cash is an asset account and therefore increases with a debit and decreases with a credit. B. CORRECT Depreciation Expense is an expense account and therefore increases with a debit and decreases with a credit. C. CORRECT Prepaid Rent is an asset account and therefore increases with a debit and decreases with a credit. D. incorrect Sales Revenue is a revenue account and therefore increases with a credit and decreases with a debit. E. incorrect Deferred Revenue is a liability account and therefore increases with a credit and decreases with a debit.

Which of the following accounts decreases with a credit? Select all that apply. A. Accrued Wages B. Cost of Goods Sold C. Sales D. Preferred Stock E. Accounts Receivable F. Cash

A. incorrect Accrued Wages is a liability account and therefore increases with a credit and decreases with a debit. B. CORRECT Cost of Goods Sold is an expense account and therefore increases with a debit and decreases with a credit. C. incorrect Sales is a revenue account and therefore increases with a credit and decreases with a debit. D. incorrect Preferred Stock is an equity account and therefore increases with a credit and decreases with a debit. E. CORRECT Accounts Receivable is an asset account and therefore increases with a debit and decreases with a credit. F. CORRECT Cash is an asset account and therefore increases with a debit and decreases with a cre

Suppose on June 30, 2015 Ziesel, Corp., received a utility bill for $1,200 and paid it immediately. How would you record this transaction on a T-account?

Cash is an asset account and it is decreased by credits (on the right in T-accounts). Utility Expense is an expense account and it is increased by debits (on the left in T-accounts).

Which of the following is an expense account? Select all that apply. Cost of Goods Sold Prepaid Expense Wages Payable Rent Expense Wages Expense

Cost of Goods Sold CORRECT Cost of Goods Sold is an expense account. Prepaid Expense INCORRECT Prepaid Expense is an asset account. Wages Payable INCORRECT Wages Payable is a liability account. Rent Expense CORRECT Rent Expense is an expense account. Wages Expense CORRECT Wages Expense is an expense account.

Which of the following is FALSE regarding Accrual Accounting? A. Revenues are recorded when earned B. Accrual accounting follows the matching principle C. Expenses are recorded as incurred D. Transactions are only recorded when there is an exchange of cash

D. CORRECT This is true for Cash Basis Accounting, but not for Accrual Accounting.

NOTES RECEIVABLE increases with a Debit Credit

DEBIT is correct Assets increase with a debit.

Gill Fishing, a company that provides fishing expeditions for tourists at 8 locations across the globe, sold 15 tickets for expeditions at its various locations on January 1, 2015 for a total of $15,000 ($1,000 per customer). The customers will go on the expeditions during the fishing months from May - September 2015. All of the customers paid in cash at the time of the purchase.What impact would the receipt of cash have on this date? By July 31, 2015, Gill had provided eight of the fifteen expeditions.What would be the impact when Gill Fishing records the services provided for the month?

On January 1, 2015, when the tickets were sold, the Cash account (an asset) should be debited to show the amount received ($15,000) and, since the revenue has not been earned and Gill Fishing is obligated to provide the expeditions, the Deferred Revenue account (a liability) should be increased (credited) by the amount of funds received ($15,000). On July 31, 2015, Gill Fishing has earned the revenue from eight of the tickets sold and reduced their obligation by the same amount so they should reduce (debit) the Deferred Revenue account (a liability) for $8,000 and increase (credit) the Revenue account (part of owners' equity) for $8,000, representing eight of the fifteen expeditions completed.

UDeliver, a moving rental truck company, paid $3,600 on 1/1/2016 for 12 months of insurance coverage on a fleet of trucks for the coming year. What would be the impact on this date? What would be the impact on March 31, 2016 when UDeliver makes an adjustment to reflect that three months of the insurance coverage has been used up?

On January 1, 2016, Prepaid Insurance (an asset) increases with a debit of $3,600 and Cash (an asset) decreases with a credit of $3,600. On March 31, 2016, Insurance Expense (part of owners' equity) increases with a debit of $900 and Prepaid Insurance (an asset) decreases with a credit of $900.

Which of the following accounts is decreased by a debit? Select all that apply. Sales Revenue Rent Expense Deferred Revenue Interest Expense Prepaid Rent

Sales Revenue is CORRECT Sales Revenue is a revenue account as part of owners' equity and therefore increases with a credit and decreases with a debit. Rent Expense is INCORRECT Rent Expense is an expense account as part of owners' equity and therefore increases with a debit and decreases with a credit. Deferred Revenue is CORRECT Deferred Revenue is a liability account and therefore increases with a credit and decreases with a debit. Interest Expense is INCORRECT Interest Expense is an expense account as part of owners' equity and therefore increases with a debit and decreases with a credit. Prepaid Rent is INCORRECT Prepaid Rent is an asset account and therefore increases with a debit and decreases with a credit.

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the revenue on the books of Traxx?

The correct answer is to debit Accounts Receivable for $16,000 as the company now has the right to receive cash and credit Revenue for $16,000 to recognize the revenue associated with the sale.

Cakery Bakery receives $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when they receive this payment?

The correct answer is to debit Cash (an asset) for $1,000 as the company now has the cash and credit Deferred Revenue (a liability) for $1,000 as the company now has an obligation to provide services in the future.

Double Entry Accounting

The system of accounting that requires that every transaction be entered using both debits and credits and that the value of the debits must equal the value of the credits.

On January 1, 2015 Sweetums, a candy manufacturer, sold 15 boxes of their signature chocolate bars to a local retailer for $1,500. Sweetums had paid $720 to produce the chocolate bars. Sweetum's granted credit terms and permitted the retailer to pay in 30 days.On the same day of the sale, Sweetums delivered the chocolate bars to the retail store. Consider both the revenue and cost of this transaction on the books of Sweetums. What would be the impact on January 1, 2015, the date of the sale? On January 30, 2015 Sweetums received payment in full from the local retailer.What would be the impact of this transaction on this date?

This transaction involves both the sale and the related cost of the sale. On 1/1/15, the Revenue account (part of owners' equity) should be increased (with a credit) by $1,500, the amount of the sale, and, since the retailer was given 30 days to pay, Accounts Receivable (an asset) should be increased (with a debit) by the same amount of $1,500. On the cost side, the chocolate bars came from inventory so the Inventory account (an asset) should be reduced (with a credit) by $720, the amount that it cost Sweetums to produce the chocolate bars. The expense should be increased (with a debit) to Cost of Goods Sold (part of owners' equity) for $720. On 1/30/15, receipt of the payment from the retailer means that the Cash account (an asset) should be increased (with a debit) by $1,500 and the Accounts Receivable account (also an asset) should be decreased (with a credit) by $1,500

Kopera is a small family-owned office supply store. Suppose on September 1, 2015 Kopera purchased a large order of notebooks from a supplier for $850. Kopera has 30 days to pay the supplier.What would the journal entry for this purchase look like? 30 days later, Kopera paid for the notebooks.What would the journal entry for the payment made on September 30, 2015 look like?

To record the purchase on 9/1/15: Debit Inventory for $850 Credit Accounts Payable for $850 To record the payment 30 days later: Debit Accounts Payable for $850Credit Cash for $850

T-accounts

a simplified version of ledger accounts. These shows all the activity for a given account for a specific period of time, or in other words, they are the summary of several journal entries. By convention, all debit activity is shown on the left side and all credit activity is shown on the right side.