Chapter 2 Double Entry Concept
This quiz will help you enchance your understanding of Chapter 2 Double Entry Concept.
Questions and Answers
- 1.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Bank Overdraft: ________
Explanation
Bank overdraft is classified as a liability because it represents the amount of money that a company has borrowed from a bank. It is essentially a negative balance in the company's bank account, indicating that the company has spent more than it currently has in its account. Therefore, it is a liability that the company owes to the bank and needs to repay.Rate this question:
- 2.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Motor Vehicle: ________
Explanation
A motor vehicle is classified as an asset because it is a valuable resource owned by a business or individual that can provide future economic benefits. Assets are resources that have monetary value and are expected to generate income or be used in the operations of a business.Rate this question:
- 3.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Inventory: ________
Explanation
Inventory is classified as an asset because it represents the goods or products that a company holds for sale in the normal course of business. It is considered an asset because it has economic value and can be converted into cash or used to generate revenue.Rate this question:
- 4.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Sales: ________
Explanation
Sales is classified as revenue because it represents the income generated from the sale of goods or services by a business. Revenue is a category of the income statement that reflects the company's earnings from its primary activities. It is an inflow of economic benefits that increases the owner's equity and is essential for the financial success of a business.Rate this question:
- 5.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Purchases: ________
Explanation
Purchases are classified as an expense because they represent the cost of acquiring goods or services for the purpose of generating revenue. Expenses are incurred by a business in order to operate and maintain its operations. Purchases are considered an expense because they decrease the overall profitability of a business and are necessary for the business to continue its operations.Rate this question:
- 6.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Drawings: ________
Explanation
Drawings are classified as Owner's Equity because they represent the withdrawals or distributions made by the owner(s) of a business for personal use. Drawings decrease the owner's equity in the business and are not considered as expenses or liabilities.Rate this question:
- 7.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Sales Returns: ________
Explanation
Sales Returns are considered an expense because they represent the cost of goods or services that are returned by customers. When a customer returns a product, the company incurs expenses related to processing the return, restocking the inventory, and potentially issuing a refund. These expenses are deducted from the company's revenue, resulting in a decrease in net income. Therefore, sales returns are classified as an expense on the financial statements.Rate this question:
- 8.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Rent Expense: ________
Explanation
Rent Expense is classified as an expense. Expenses are costs incurred by a business in order to generate revenue. Rent expense refers to the cost of renting a property or space for business purposes. It is considered an operating expense and is deducted from the revenue to calculate the net income of a business.Rate this question:
- 9.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Interest income: ________
Explanation
Interest income is classified as revenue because it represents the amount of money earned by a company from the interest on its investments or loans. Revenue is the income generated by a business through its normal operations, and interest income falls under this category as it is a result of the company's financial activities.Rate this question:
- 10.
Classify the Item as Asset, Liability, Owner's Equity, Revenue or Expense. Bank Loan: ________
Explanation
The correct answer for classifying "Bank Loan" is Liability. A bank loan represents a debt owed by the company to the bank. It is a liability because the company has an obligation to repay the loan amount to the bank in the future.Rate this question:
- 11.
Choose whether the account is a debit or credit in nature. Trade Debtors
- A.
Debit
- B.
Credit
Correct Answer
A. DebitExplanation
The account "Trade Debtors" is classified as a debit because it represents the amount of money owed to a company by its customers for goods or services that have been delivered but not yet paid for. Debit accounts are used to record assets and expenses, and since trade debtors represent an asset (money owed to the company), it is classified as a debit.Rate this question:
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- 12.
Choose whether the account is a debit or credit in nature. Capital
- A.
Debit
- B.
Credit
Correct Answer
B. CreditExplanation
Capital is a type of account that represents the owner's equity in a business. It shows the amount of money or assets that the owner has invested in the business. In accounting, capital is considered a credit account because it increases the owner's equity when money or assets are added to the business.Rate this question:
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- 13.
Choose whether the account is a debit or credit in nature. Drawings
- A.
Debit
- B.
Credit
Correct Answer
A. DebitExplanation
The account "Drawings" is classified as a debit because it represents the withdrawals made by the owner from the business for personal use. Debit is used to record increases in assets and decreases in liabilities and owner's equity. Since drawings decrease the owner's equity in the business, it is recorded as a debit entry.Rate this question:
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- 14.
Choose whether the account is a debit or credit in nature. Bank Overdraft
- A.
Debit
- B.
Credit
Correct Answer
B. CreditExplanation
Bank Overdraft is a type of liability account in which a bank allows its customer to withdraw more money from their account than they have available. This means that the customer owes the bank money, making it a credit in nature.Rate this question:
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- 15.
Choose whether the account is a debit or credit in nature. Note receivable
- A.
Debit
- B.
Credit
Correct Answer
A. DebitExplanation
A note receivable is an asset account that represents a written promise to receive a specific amount of money on a future date. As an asset, it has a debit balance, which means it increases on the debit side of the accounting equation. Therefore, the correct answer is debit.Rate this question:
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- 16.
Choose whether the account is a debit or credit in nature. Sales
- A.
Debit
- B.
Credit
Correct Answer
B. CreditExplanation
The account "Sales" is classified as a credit account. This means that when sales are made, the company receives money and the amount is recorded as a credit entry in the Sales account. A credit entry increases the balance of the account.Rate this question:
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- 17.
Choose whether the account is a debit or credit in nature. Purchase Returns
- A.
Debit
- B.
Credit
Correct Answer
B. CreditExplanation
The account "Purchase Returns" is a credit in nature. This means that when a purchase is returned, it is recorded as a credit entry in this account. A credit entry represents a decrease in assets or an increase in liabilities or equity. In this case, the purchase return reduces the amount owed to the supplier, so it is recorded as a credit.Rate this question:
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- 18.
Choose whether the account is a debit or credit in nature. Interest expense
- A.
Debit
- B.
Credit
Correct Answer
A. DebitExplanation
Interest expense is an expense account and expenses are recorded as debits in accounting. Therefore, the correct answer is debit.Rate this question:
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- 19.
Choose whether the account is a debit or credit in nature. Return Inwards
- A.
Debit
- B.
Credit
Correct Answer
A. DebitExplanation
Return Inwards is a type of revenue or income account in accounting. Revenue accounts are typically credited when there is an increase in revenue. However, in this case, the account is classified as a debit because Return Inwards represents a decrease in revenue. When goods or services are returned by customers, it results in a decrease in revenue, hence the account is debited.Rate this question:
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- 20.
Choose whether the account is a debit or credit in nature. Commission Income
- A.
Debit
- B.
Credit
Correct Answer
B. CreditExplanation
Commission Income is a type of revenue earned by a business for providing services or selling products. Revenue accounts like Commission Income have a credit balance because they increase the owner's equity or the company's net income. When the business earns commission income, it is recorded as a credit entry in the account to reflect the increase in revenue. Therefore, the correct answer is Credit.Rate this question:
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- 21.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Sold goods on credit to customer : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Debtors SalesExplanation
Debtors should be debited because the company has made a sale on credit and the customer owes money to the company. Sales should be credited because it represents the revenue earned from the sale of goods.Rate this question:
- 22.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Sold goods for cash : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Cash at Bank Sales - 23.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Bought office equipment with cash : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Office Equipment Cash at BankExplanation
When office equipment is bought with cash, the account "Office Equipment" is debited to record the increase in assets, and the account "Cash at Bank" is credited to record the decrease in cash.Rate this question:
- 24.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Goods sold to customers which have not been paid were returned due to wrong pricing : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Sales Returns DebtorsExplanation
In this transaction, goods that were sold to customers but not paid for were returned due to wrong pricing. This means that the company received the goods back and needs to reverse the revenue that was initially recorded for the sale. The account to be debited is Sales Returns, as it represents the reduction in revenue. The account to be credited is Debtors, as it represents the reduction in the amount owed by the customers.Rate this question:
- 25.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Received rent by cheque : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Cash at Bank Rent IncomeExplanation
The account to be debited is Cash at Bank because the company received rent in the form of a cheque, which increases the cash balance in the bank account. The account to be credited is Rent Income because the company earned rental income from the tenant.Rate this question:
- 26.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Paid salary by cheque : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Salary Expense Cash at BankExplanation
In this transaction, the account to be debited is Salary Expense because the company is incurring an expense by paying salaries. The account to be credited is Cash at Bank because the company is reducing its cash balance by making the payment through a cheque.Rate this question:
- 27.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Bought goods on credit from supplier : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Purchases CreditorsExplanation
Debit Purchases and Credit Creditors.Rate this question:
- 28.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Returned goods which have not been paid to supplier : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Creditors Purchases ReturnsExplanation
When goods are returned to a supplier without payment being made, the account to be debited is "Creditors" because the company owes money to the supplier. The account to be credited is "Purchases Returns" because the company is returning the goods that were previously purchased.Rate this question:
- 29.
State the account (accounts are like Office Equipment, Cash at Bank, Debtors, Creditors, Drawings, Sales, Purchases, Sales Returns, Purchases Returns, Rent Income or Salary Expense) that is to be debited and credited for the transaction below: Owner withdrew cash from business for personal use : Debit ____________ Credit _____________ (If the answer is Debit Debtors and Credit Sales, then type: Debtors Sales).
Correct Answer
Drawings Cash at BankExplanation
The correct answer is Drawings (to be debited) and Cash at Bank (to be credited). When the owner withdraws cash from the business for personal use, it is considered as a withdrawal of the owner's equity from the business. Therefore, the Drawings account is debited to decrease the owner's equity, and the Cash at Bank account is credited to decrease the amount of cash available in the business.Rate this question:
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