Accounting Quiz For Starters

When we increase accounts receivable, it means that we are recording more money owed to the company by its customers. In accounting, an increase in an asset account is recorded as a debit. Therefore, to increase accounts receivable, we need to debit them. This means that the correct answer is True.

When recording journal entries the debits and credits ALWAYS have to balance

The statement is false because debiting revenue would decrease it, not increase it. In accounting, debiting revenue means recording a decrease in revenue, while crediting revenue means recording an increase. Therefore, to increase revenue, we would need to credit it, not debit it.

Cash is an asset, thus we have to debit it to increase it

To increase common shares, we need to credit them. In accounting, crediting an account increases its balance. Therefore, if we want to increase the number of common shares, we would credit the common shares account. This is because when a company issues more common shares, it receives capital from investors, which increases the company's equity.

The trial balance is important because it helps ensure that the total debits and total credits in the accounting records are equal. This is crucial for maintaining accurate financial statements and detecting any errors or discrepancies in the recording of transactions. By comparing the debits and credits, it allows accountants to identify any mistakes and make necessary adjustments before preparing the final financial statements. This helps ensure the integrity and accuracy of the company's financial information.

To decrease accounts payable, we have to debit it. When we debit an account, we increase its balance. Since accounts payable is a liability account, it has a normal credit balance. Therefore, to decrease accounts payable, we need to debit it, not credit it.

When the owner makes a withdrawal from the business for personal use, it is recorded as an increase in the owner's drawings account. To reflect this increase, the account is debited. Therefore, the statement that to increase owner's drawings, we have to debit it is correct.

Posting to the general ledger involves the transfer of journal entries to the ledger accounts. This process helps in organizing and summarizing the transactions recorded in the journal. By posting the journal entries to the respective ledger accounts, the financial information is classified and stored in a systematic manner, making it easier to analyze and prepare financial statements. The general ledger serves as a central repository for all the accounts and provides a comprehensive view of the financial transactions of a business.

To increase an expense, we have to debit it. Credits are used to decrease expenses or record payments made towards expenses. Therefore, the given statement is incorrect.

A post-closing trial balance contains all the accounts related to assets, liabilities, and owner's equity only. This means that it includes the balances of all the accounts that are classified under these three categories. It does not include any temporary accounts such as revenue, expenses, or dividends, as these accounts are closed at the end of the accounting period. The purpose of a post-closing trial balance is to ensure that all the permanent accounts are in balance after the closing entries have been made.

Entries in the journal are recorded chronologically, meaning that they are recorded in the order in which they occur. This ensures that the transactions are properly documented and can be easily traced back to their original dates. By recording entries in chronological order, it becomes easier to analyze and understand the sequence of events and transactions that have taken place within a business. This helps in maintaining accurate financial records and facilitates the preparation of financial statements.

A general ledger is a document that records all the accounts of a business, including the activities and balances of each specific account. It serves as a central repository for all financial transactions and helps in preparing financial statements. The general ledger provides a comprehensive overview of the financial health of the business and is an essential tool for financial analysis and decision-making.

By debiting the income statement balances, you are closing the revenue accounts for the year. This means that you are transferring the balances from the revenue accounts to another account, such as retained earnings or a summary account, to reflect the revenues earned during the year. This process is part of the closing entries at the end of the accounting period to prepare for the next period's transactions.

In the new accounting period, zero balances can be found in some accounts. This means that there is no remaining balance in these accounts at the start of the period. The accounts that are most likely to have zero balances are Revenue and Expenses. Revenue accounts represent the income earned by a company, and Expenses accounts represent the costs and expenses incurred by the company. At the start of a new accounting period, all revenue and expense balances from the previous period would have been closed out, resulting in zero balances in these accounts.

After posting the closing entries, a company must prepare a post-closing trial balance. This trial balance is prepared to ensure that all temporary accounts have been properly closed and that the ending balances of permanent accounts are accurate. It includes only the balances of permanent accounts, such as assets, liabilities, and equity accounts. The post-closing trial balance helps in verifying the accuracy of the closing process and serves as a starting point for the next accounting period.

The statement of Owner's Equity is the correct answer because it shows the changes in the owner's capital over a specific period, which is also reflected in the balance sheet. It includes net income or loss from the income statement, any additional investments or withdrawals made by the owner, and any changes in the owner's equity due to other factors. Therefore, the statement of Owner's Equity serves as a bridge between the income statement and the balance sheet, ensuring that the financial information is accurately represented across both statements.

The statement of Owner's equity is a financial statement that reports any changes in equity over the reporting period. It provides information on how the owner's equity has changed during a specific time frame. This statement includes details on any increases or decreases in equity due to various factors such as net income, additional investments, withdrawals, and other changes. By analyzing the statement of Owner's equity, stakeholders can understand the financial health of the business and how the owner's equity has been affected over time.

After three months, the company has paid off a total of 3,000 (2,000 x 3) from the principal amount of the loan. Since the principal payments are deducted from the current portion of the loan, the current portion would decrease by 3,000. Therefore, the current portion of the loan after three months would be 60,000 - 3,000 = 57,000. The remaining 3,000 would be allocated to the non-current portion of the loan, resulting in a non-current portion of 30,000 (27,000 + 3,000). Therefore, the correct answer is 24,000 Current and 30,000 non-current.

The net profit of the company for the previous month is 0. This is because the expenses and the Service Revenue account have the same balance of 5,500, resulting in a net profit of zero.

A credit balance in the income summary account indicates that the company has earned more revenue than it has incurred expenses during the accounting period. This means that the company has generated a profit. The income summary account is used to temporarily hold the revenues and expenses before they are closed out to the retained earnings account. A credit balance in the income summary account shows that the revenues exceed the expenses, resulting in a profit for the company.

The correct answer is Rent Expense and Revenue. Temporary accounts are those that are used to record transactions for a specific accounting period and are closed at the end of the period. Rent Expense is a temporary account as it represents an expense incurred during a specific period. Revenue is also a temporary account as it represents the income earned during a specific period. Cash and Bank Loans, on the other hand, are not temporary accounts as they are not closed at the end of the accounting period but carry forward to the next period.

The chart of accounts is a listing of all the accounts being used by businesses, but it does not necessarily have a standard set of numbers. The numbers assigned to each account may vary depending on the business's specific needs and preferences. Therefore, the given statement is false.

The accounts that will not show on the post-closing trial balance are Service Revenue and Expenses. The post-closing trial balance is prepared after the closing entries have been made to transfer the temporary accounts (such as revenue and expenses) to the retained earnings account. Service Revenue and Expenses are temporary accounts that are closed at the end of the accounting period, so they will not appear on the post-closing trial balance. Cash and Accounts Receivable, on the other hand, are permanent accounts and their balances are carried forward to the next accounting period, so they will be included in the post-closing trial balance.

The statement "Owner's drawings" refers to the practice of the owner withdrawing money from the business for personal use. This action decreases the owner's equity because the owner is taking money out of the business, reducing their ownership stake. It also decreases the cash balance of the business because money is being withdrawn. The account for owner's drawings is typically recorded by debiting it, which means increasing the account. Therefore, the correct answer is that owner's drawings decrease owner's equity, decrease cash, increase by debiting it, and is an account to record money that the owner is withdrawing for their personal use.