Chapter 2 Analyzing Transaction into Debt and Credit Parts

True and False An accounting device used to analyze transaction is a T account. True

True and False An amount recorded on the left side of a T account is a credit. False

True and False Each asset account has a normal debit balance. True

True and False Each liability account has a normal credit balance. True

True and False The balance of an account increases on the same side as the normal balance side. True

True and False Asset accounts increase on the credit side. False

True and False Each transaction changes the balances in at least two accounts. True

True and False A list of accounts used by a business is a chart of accounts. True

True and False When cash is paid for supplies, the supplies account is increased by a debit. True

True and False Common accounting practice is to record withdrawals as debits directly in the owner’s capital account. False

True and False The left side of an asset account is the credit side because asset accounts are on the left side of the accounting equation. False

True and False A drawing account is decreased by debits and increased by credits. False

True and False Increases in expense accounts are recorded as debits because they decrease the owner’s capital account. True

True and False The normal balance side of an account receivable account is a credit. False

True and False Accounts payable accounts are increased with a debit. False

True and False Advertising Expense is increased with a debit. True

True and False Cash is increased with a credit. False

True and False Prepaid Insurance is decreased with a credit. True

True and False To summarize withdrawal information separately from the other records, owner withdrawal transactions are recorded in the owner’s capital account. False

True and False Increases to liability accounts are recorded on the debit side. False

Multiply Choice Questions

Multiply Choice The right side of a T account is the a.Debit side b.Credit side c.Normal balance side b. Credit side

Multiply Choice If an amount is recorded on the side of a T account opposite the normal balance side a.The account balance is increased. b.The account balance is decreased. c.The account balance is unaffected. b. The account balance is decreased

Multiply Choice The normal balance side of an asset account is the a.Debit side b.Credit side c.Right side a. Debit side

Multiply Choice When the owner invests cash in a business, the owner’s capital account is a.Increased by a debit b.Increased by a credit c.Decreased by a debit d.Decreased by a credit b. Increased by a credit

Multiply Choice When a business pays cash on account, a liability account is a.Increase by a debit b.Increased by a credit c.Decreased by a debit d.Decreased by a credit. c. Decreased by a debit

Multiply Choice When cash is received from sales, the change in the owner’s equity is usually a.Recorded in a separate revenue account. b.Recorded directly in the owner’s capital account. c.Recorded as interest revenue. d.Always recorded on the debit side. a. Recorded in a separate revenue account.

Multiply Choice Increases in a revenue account are shown on a T account’s a.Debit side. b.Credit side. c.Left side d.None of these. b. Credit side

Multiply Choice When $1,500 cash is received on account. a.Sales is increased with a credit and cash is increased with a credit. b.Accts. Rec. is increased with a debit and Cash is increased with a credit. c.Accts. Rec. Is decreased with a credit and Cash is increased with a debit. d.Accts. Rec. is decreased with a debit and Cash is increased with a debit. c. Accts. Rec. Is decreased with a credit and Cash is increased with a debit.

Multiply Choice The normal balance side of any expense account is the a.Debit side b.Credit side c.Right side d.None of these a. Debit side

Determining the Classification of an Accounts Sales, Drawing, Capital, Owner’s Equity Accts. Rec., Prepaid Insurance, Cash, Supplies Accts. Payable Owner’s Equity Asset Liability

MAKE SURE YOU KNOW THE FOLLOWING  Normal Balance Side of Asset Accounts (Cash, Accts. Rec., Supplies, and Prepaid Insurance)  Normal Balance Side of Liability Accounts (Accts. Payable)  Normal Balance Side of Owner’s Equity Accounts (Capital, Drawing, Expenses, and Sales)  What side each of the above accounts increase and decrease on.

The Test Consist of 4 Parts  True and False  Multiply Choice  Determining the Normal Balance, Increases, and Decreases Side for Accounts (See Problem 2-1)  Analyzing Transactions into Debits and Credit Parts (See Mastery Problem 2-4)