MODULE 2
RECORDING TRANSACTIONS
Demonstration Problem 1
Debits and Credits
For each of the following accounts, indicate the side of the account that should be used to
record an increase in that account.
Account Name
Owners' Equity
Sales Revenue
Equipment
Utilities Expense
Supplies Expense
Service Revenue
Supplies
Rent Expense
Notes Payable
Cost of Goods Sold
Side used to Record Increases
Credit
Credit
Debit
Debit
Debit
Credit
Debit
Debit
Credit
Debit
26
Demonstration Problem 2
Debits and Credits
For each of the following independent transactions, identify the account that would be debited
and the account that would be credited.
Transaction
1. Purchased furniture on credit.
Debit
Furniture
Credit
Accounts
Payable
2. Purchased inventory for cash.
Inventory
Cash
3. Sold goods to customers on credit.
Accounts Receivable Sales Revenue
4. Record cost of goods sold on the previous sale. Cost of Goods Sold
Inventory
5. Purchased supplies.
Supplies
Cash
6. Borrowed money from a bank.
Cash
Notes Payable
7. Paid employee wages for the month.
Wages Expense
Cash
8. Paid for the furniture purchased previously.
Accounts Payable
Cash
9. Paid rent for the month.
Rent Expense
Cash
10. Collected cash from a customer for goods sold Cash
Accounts
previously.
Receivable
27
Practice Problem 1
Debits and Credits
For each of the following accounts, indicate the side of the account that should be used to record
an increase in that account.
Account Name
Owners' Equity
Service Revenue
Cash
Furniture
Utilities Expense
Supplies
Sales Revenue
Accounts Payable
Accounts Receivable
Cost of Goods Sold
Side used to Record Increases
Credit
Credit
Debit
Debit
Debit
Debit
Credit
Credit
Debit
Debit
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Practice Problem 2
Debits and Credits
For each of the following independent transactions, identify the account that would be debited
and the account that would be credited.
Transaction
1. Purchased a computer for cash.
2. Purchased inventory on credit.
3. Purchased supplies.
4. Sold goods to customers on credit.
5. Record the cost of the goods sold.
6. Borrowed money from a bank.
7. Paid employee wages for the month.
8. Paid for the inventory purchased previously.
9. Collected cash from a customer for goods
sold previously.
29
Debit
Computer
Inventory
Supplies
Accounts
Receivable
Cost of Goods Sold
Cash
Wages Expense
Accounts Payable
Cash
Credit
Cash
Accounts Payable
Cash
Sales Revenue
Inventory
Notes Payable
Cash
Cash
Accounts
Receivable
Homework Problem 1
Debit and Credit Terminology
For each of the following accounts, indicate the side of the account that should be used to record
an increase in that account.
Account Name
Cash
Supplies Expense
Accounts Payable
Utilities Expense
Owners' Equity
Service Revenue
Supplies
Rent Expense
Notes Payable
Salaries Expense
Debit
Debit
Debit
Credit
Credit
Debit
Credit
Credit
Debit
Debit
Credit
Debit
30
Homework Problem 2
Debit and Credit Terminology
For each of the following accounts, indicate the side of the account that should be used to record
an increase in that account.
Account Name
Supplies Expense
Cash
Accounts Payable
Equipment
Owners' Equity
Service Revenue
Furniture
Rent Expense
Notes Payable
Salaries Expense
Debit
Debit
Debit
Credit
Credit
Debit
Credit
Credit
Debit
Debit
Credit
Debit
31
Homework Problem 3
Debit and Credit Terminology
For each of the following independent transactions, identify the account that would be debited
and the account that would be credited.
1.
2.
3.
4.
5.
Transaction
Borrowed money from a bank.
Purchased inventory for cash.
Purchased inventory on credit.
Sold goods to customers for cash.
Sold goods to customers on credit.
Debit
Cash
Inventory
Inventory
Cash
Accounts
Receivable
Wages Expense
Utilities Expense
Supplies Expense
Accounts Payable
Note Payable
6. Paid employee wages for the month.
7. Paid utilities for the current month.
8. Recorded supplies used during the month.
9. Paid for equipment purchased previously.
10. Repaid the note to the bank.
32
Credit
Notes Payable
Cash
Accounts Payable
Sales Revenue
Sales Revenue
Cash
Cash
Supplies
Cash
Cash
Homework Problem 4
Debit and Credit Terminology
For each of the following independent transactions, identify the account that would be debited
and the account that would be credited.
Transaction
1. Borrowed money from a bank.
2. Purchased supplies for cash.
3. Purchased equipment on credit.
4. Sold goods to customers for cash.
5. Sold goods to customers on credit.
6. Paid employee wages for the month.
7. Paid utilities for the current month.
8. Recorded supplies used during the month.
9. Paid for the equipment purchased
previously.
10. Repaid the note to the bank.
Debit
Credit
Cash
Notes Payable
Supplies
Cash
Equipment
Accounts Payable
Cash
Sales Revenue
Accounts Receivable Sales Revenue
Wages Expense
Cash
Utilities Expense
Cash
Supplies Expense
Supplies
Accounts Payable
Cash
Notes Payable
33
Cash
Homework Quiz
Debits and Credits
1.
The Equipment account's proper classification is:
a.
Revenue
b.
Liability
c.
Expense
d.
Asset
2.
The Supplies account's proper classification is:
a.
Asset
b.
Revenue
c.
Liability
d.
Expense
3.
The Cost of Goods Sold account's proper classification is:
a.
Asset
b.
Revenue
c.
Liability
d.
Expense
4.
The Fees Earned account's proper classification is:
a.
Asset
b.
Liability
c.
Owner's equity
d.
Revenue
5.
The Accounts Payable account's proper classification and normal account balance are:
a.
Asset
b.
Liability
c.
Owner's equity
d.
Revenue
6.
The Inventory account's proper classification is:
a.
Revenue
b.
Expense
c.
Liability
d.
Asset
7.
The Accounts Receivable account's proper classification is:
a.
Asset
b.
Liability
c.
Owner's equity
d.
Revenue
34
8.
Altoona Plumbing acquired Office Supplies on account. Which of the following entries properly
records this transaction?
a.
Debit: Office Supplies; Credit: Cash
b.
Debit: Cash; Credit: Office Supplies
c.
Debit: Office Supplies; Credit: Accounts Payable
d.
Debit: Accounts Payable; Credit: Office Supplies
9.
Altoona Plumbing acquired Equipment by making a Cash down payment and issuing a note to
finance the remaining balance. Which of the following entries properly records this transaction?
a.
Debit: Equipment; Credit: Cash, Accounts Payable
b.
Debit: Equipment; Credit: Cash, Notes Payable
c.
Debit: Equipment; Credit: Cash
d.
Debit: Equipment; Credit: Cash, Accounts Payable, Notes Payable
10.
Altoona Plumbing made its monthly office rent payment. Which of the following entries properly
records this transaction?
a.
Debit: Cash; Credit: Rent Expense
b.
Debit: Rent Expense; Credit: Cash
c.
Debit: Rent Expense; Credit: Accounts Payable
d.
Debit: Accounts Payable; Credit: Rent Expense
11.
Altoona Plumbing recorded its monthly service revenue reflecting both cash sales and sales on
account. Which of the following entries properly records this transaction?
a.
Debit: Accounts Receivable; Credit: Service Revenue
b.
Debit: Service Revenue;
Credit: Accounts Receivable, Cash
c.
Debit: Accounts Receivable, Cash; Credit: Service Revenue
d.
Debit: Cash; Credit: Accounts Receivable
12.
Josephine Marlow, M.D. just recorded her billing to clients for services rendered. Which of the
following entries properly records this transaction?
a.
Debit: Accounts Receivable; Credit: Fees Earned
b.
Debit: Accounts Receivable; Credit: Cash
c.
Debit: Fees Earned; Credit: Accounts Receivable
d.
Debit: Cash; Credit: Fees Earned
13.
Josephine Marlow, M.D. recorded the collection of cash from her cash customers. Which of the
following entries properly records this transaction?
a.
Debit: Fees Earned; Credit: Cash
b.
Debit: Fees Earned; Credit: Accounts Receivable
c.
Debit: Cash; Credit: Fees Earned
d.
Debit: Accounts Receivable; Credit: Fees Earned
14.
Josephine Marlow, M.D., a sole proprietor, collected cash from customers for services performed
and billed previously. Which of the following entries properly records this transaction?
a.
Debit: Fees Earned; Credit: Cash
b.
Debit: Fees Earned; Credit: Accounts Receivable
c.
Debit: Cash; Credit: Accounts Receivable
d.
Debit: Accounts Receivable; Credit: Fees Earned
35
15.
Ronald's Appliance Shop purchased Office Supplies for
$1,000 on account. After inspecting
the purchase, $200 of the goods was found to be defective and returned. Which of the following
entries properly records the return of these goods?
a.
Debit: Cash, $200; Credit: Office Supplies, $200
b.
Debit: Cash, $800; Credit: Office Supplies, $800
c.
Debit: Accounts Payable, $200; Credit: Office Supplies, $200
d.
Debit: Accounts Payable, $800; Credit: Office Supplies, $800
16.
Richard Valort, owner of Valort Landscaping Service, recently issued paychecks to his
employees. The proper entry to record this transaction includes:
a.
A debit to the Drawing account
b.
A debit to Wages Payable
c.
A debit to Wages Earned
d.
A debit to Wages Expense
17.
An employee of Valort Landscaping Service, a sole proprietorship reported an overpayment error
to the owner, Richard Valort. (The error was made in computing and paying the employee's
wages.) Valort receives cash from the employee for the amount of the overpayment, which of
the following entries will Valort make?
a.
Cash, debit; Wages Expense, credit
b.
Wages Payable, debit; Wages Expense, credit
c.
Wages Expense, debit, Cash, credit
d.
Wages Expense, debit; Wages Payable, credit
18.
Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000
during July. Overstreet's beginning Accounts Receivable balances for July was $32,200. How
would July's customer billing be reflected on Overstreet's books?
a.
Debit Accounts Receivable, $32,200; Credit Fees Earned, $32,200
b.
Debit Accounts Receivable, $28,000; Credit Fees Earned, $28,00
c.
Debit Accounts Receivable, $80,000; Credit Fees Earned, $80,00
d.
Debit Cash, $32,200; Credit Fees Earned, $32,200
19.
Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000
during July (Debit, Accounts Receivable; Credit, Fees Earned). No cash collections from
customers were received during July. Overstreet's beginning Accounts Receivable balance for
July was $32,200. Overstreet's ending Accounts Receivable balance for July was:
a.
$ 28,000
b.
$ 47,800
c.
$ 80,000
d.
$ 112,200
20.
Overstreet Computer Services bills all customers on account. Overstreet billed clients $80,000
during July and collected $25,500 in customer payments. Overstreet's beginning Accounts
Receivable balances for July was $32,200. How would July's customer payments be reflected on
Overstreet's books?
a.
Debit Cash, $25,500; Credit, Accounts Receivable, $25,500
b.
Debit Cash, $32,200; Credit, Accounts Receivable, $32,200
c.
Debit Cash, $80,000; Credit, Accounts Receivable, $80,000
d.
Debit Cash, $32,200; Credit, Fees Earned, $32,200
36
21.
Which of the following account is increased by debits?
a. Notes Payable
b. Accounts Receivable
c. Revenue
d. Owners' Equity
22.
Which of the following account is increased by credits?
a. Supplies Expense
b. Accounts Payable
c. Inventory
d. Accounts Receivable
23.
Tony's Landscaping Service borrowed $7,500 from a bank. To record this transaction:
a. Notes Payable must be credited; Cash must be debited
b. Cash must be credited; Notes Payable must be debited
c. Cash debited; Notes Receivable must be credited
d. Cash credited; Notes Receivable must be debited
24.
Tony's Landscaping Service purchased a truck for $2,500. $1,000 was paid in cash and
a note payable was signed for the balance. To record this transaction:
a. Notes Payable must be credited
b. Notes Payable must be debited
c. Cash must be debited
d. Trucks must be credited
25.
A business paid $100 for utilities. To record this transaction:
a. Utilities Expense must be credited;Cash must be debited
b. Cash and Utilities Expense must be debited
c. Cash and Utilities Expense must be credited
d. Utilities Expense must be debited; Cash must be credited
26.
A business paid $100 to buy supplies. To record this transaction:
a. Supplies Expense must be credited
b. Accounts Payable must be debited
c. Supplies must be debited
d. Supplies must be credited
27.
A business sold goods to customers for $1,800 on credit. To record this transaction:
a. Accounts Receivable must be credited
b. Accounts Payable must be debited
c. Accounts Receivable must be debited
d. Accounts Payable must be credited
37
28.
A business paid $475 to a supplier for inventory purchased previously. To record this:
transaction
a. Accounts Payable must be credited; Cash must be debited
b. Cash must be credited; Accounts Payable must be debited
c. Cash debited; Accounts Receivable must be credited
d. Cash credited; Accounts Receivable must be debited
29.
Cash was collected from a customer for services provided previously. To record this:
transaction
a. Accounts Receivable must be credited
b. Accounts Payable must be debited
c. Accounts Receivable must be debited
d. Accounts Payable must be credited
30.
Supplies costing $80 were used by a business. To record this transaction:
a. Supplies Expense must be credited
b. Supplies Expense must be debited
c. Supplies must be debited
d. Cash must be credited
38
MODULE 2
Sole-Proprietorships
Demonstration Problem 1
Clean-Rite Service
This example analyzes the transactions for Clean-Rite Service for March 2000. Clean-Rite Service is a
sole-proprietorship.
The transactions are recorded in the journal and posted to the ledger.
Mar. 1
Mar. 2
Mar. 4
Mar. 9
Mar. 11
Mar. 15
Mar. 17
Mar. 22
Mar. 24
Mar. 31
DATE
2000
Mar. 1
Mar. 2
Mar. 4
Mar. 9
Mar. 11
Mar. 15
Mar. 17
Mar. 22
Mar. 24
Mar. 31
Lisa used $500 of her own money to start Clean-Rite Service.
Lisa's company borrowed $1,500 from her dad.
Clean-Rite Service paid $400 for a used vacuum cleaner and shampoo machine.
Clean-Rite Service purchased a used truck for $1,000 from Fuller Trucks Inc. Lisa paid $250
down and signed a note payable for the balance.
Clean-Rite Service paid $115 for cleaning supplies.
During the first half of March, Clean-Rite Service performed $450 of cleaning services.
Customers paid $200 in cash and promised the remaining payment by March 30.
Clean-Rite Service used $80 of the cleaning supplies.
$250 was collected from customers for services performed previously.
Lisa's company paid back $500 to her dad.
Lisa withdrew $100 from the business.
ACCOUNT
Cash
Lisa, Capital
Cash
Notes Payable
Equipment
Cash
Truck
Cash
Notes Payable
Supplies
Cash
Cash
Accounts Receivable
Service Revenue
Supplies Expense
Supplies
Cash
Accounts Receivable
Notes Payable
Cash
Lisa, Drawings
Cash
DEBIT
CREDIT
500
500
1,500
1,500
400
400
1,000
250
750
115
115
200
250
450
80
80
250
250
500
500
100
100
39
Practice Problem 1
Burton Precision Tools
This assignment lists some transactions for Burton Precision Tools for January 2000. You have to
analyze the accounts affected by each transaction and record it in the general journal.
Jan. 2
Jan. 3
Jan. 3
Jan. 9
Jan. 11
Jan. 12
Jan. 17
Jan. 28
The business purchased inventory for $5,800 on credit.
Sold goods for $7,200 to customers for cash.
The cost of the goods sold in the previous transaction was $5,100.
Purchased supplies for $150.
Paid $4,800 to suppliers for the inventory purchased previously.
Paid $85 for utilities.
Supplies costing $45 were used in January.
Paid rent of $500 for January.
DATE
2000
Jan. 2
Jan. 3
Jan. 3
Jan. 9
Jan. 11
Jan. 12
Jan. 17
Jan. 28
ACCOUNT
Inventory
Accounts Payable
Cash
Sales Revenue
Cost of Goods Sold
Inventory
Supplies
Cash
Accounts Payable
Cash
Utilities Expense
Cash
Supplies Expense
Supplies
Rent Expense
Cash
DEBIT
CREDIT
5,800
5,800
7,200
7,200
5,100
5,100
150
150
4,800
4,800
85
85
45
45
500
500
40
Practice Problem 2
East West Travels
East West Travels began operations in April 2000. The company is a sole-proprietorship. This
assignment requires you to record the transactions for April in the general journal.
Apr. 1
Apr. 2
Apr. 4
Apr. 9
Brian Smith started East West Travels by investing $40,000.
$15,000 was borrowed by issuing a note payable.
$500 was paid to purchase office supplies.
Travel arrangement services performed for customers totaled $2,000. Of this
amount, $800 was collected in cash.
Office supplies costing $200 were consumed.
An additional $300 of supplies were purchased.
A payment of $5,000 was made on the note payable.
$600 of accounts receivable was collected.
Services totaling $450 were performed ($200 for cash with the balance on credit).
$150 of supplies were consumed.
$200 of outstanding accounts receivable was collected.
Brian withdrew $500 from the business for personal use.
Apr. 11
Apr. 14
Apr. 17
Apr. 18
Apr. 22
Apr. 28
Apr. 29
Apr. 30
DATE
2000
Apr. 1
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 14
Apr. 17
Apr. 18
Apr. 22
Apr. 28
Apr. 29
Apr. 30
ACCOUNT
Cash
Brian, Capital
Cash
Notes Payable
Supplies
Cash
Cash
Accounts Receivable
Service Revenue
Supplies Expense
Supplies
Supplies
Cash
Notes Payable
Cash
Cash
Accounts Receivable
Cash
Accounts Receivable
Service Revenue
Supplies Expense
Supplies
Cash
Accounts Receivable
Brian, Drawings
Cash
DEBIT
CREDIT
40,000
40,000
15,000
15,000
500
500
800
1,200
2,000
200
200
300
300
5,000
5,000
600
600
200
250
450
150
150
200
200
500
500
41
Homework Problem 1
Aiken Consulting
This assignment lists some typical transactions for Aiken Consulting for March 2000. You have to
analyze the accounts affected by each transaction and record it in a journal.
Mar. 1
Mar. 2
Mar. 4
Mar. 9
Mar. 11
Mar. 15
Mar. 17
Mar. 31
$12,000 was borrowed from a bank.
Purchased supplies for $250.
Consulting services were provided to clients for $2,800 on credit.
Paid wages of $1,000 to the secretary.
$1,200 was collected from customers for services provided previously.
The cost of supplies used in March was $80.
$2,000 of the note payable was paid.
A payment of $700 was made for rent.
DATE
2000
Mar. 1
Mar. 2
Mar. 4
Mar. 9
Mar. 11
Mar. 15
Mar. 17
Mar. 31
ACCOUNT
Cash
Notes Payable
Supplies
Cash
Accounts Receivable
Service Revenue
Wages Expense
Cash
Cash
Accounts Receivable
Supplies Expense
Supplies
Notes Payable
Cash
Rent Expense
Cash
DEBIT
CREDIT
12,000
12,000
250
250
2,800
2,800
1,000
1,000
1,200
1,200
80
80
2,000
2,000
700
700
42
Homework Problem 2
Annie’s Bakery
This assignment lists some typical transactions for Annie's Bakery for November 2000. You have to
analyze the accounts affected by each transaction and record it in the journal.
Chart of Accounts
Nov. 1
Nov. 2
Nov. 4
Nov. 9
Nov. 9
Nov. 14
Nov. 17
Nov. 18
Nov. 22
$5,000 was borrowed from a bank.
Merchandise costing $750 was purchased on 30-day credit.
Purchased supplies for $75.
Goods were sold for $1,400 in cash.
The cost of the goods sold was $500.
$85 was paid for utilities.
Supplies costing $35 were used in November.
Paid $750 to the supplier for the merchandise purchased previously.
Paid rent of $500 for November.
DATE
ACCOUN
DEBIT
CREDIT
T
2000
Nov. 1
Nov. 2
Cash
Notes Payable
Inventory
Accounts Payable
Nov. 4
Supplies
Nov. 9
Cash
Cash
Sales Revenue
Nov. 9
Nov. 14
Nov. 17
Nov. 18
Cost of Goods Sold
Inventory
5,000
5,000
750
750
75
75
1,400
1,400
500
500
Utilities Expense
Cash
85
Supplies Expense
Supplies
35
Accounts Payable
750
85
35
750
Cash
Nov. 22
Rent Expense
Cash
500
500
43
Homework Problem 3
Carlson Realty I
On June 1, 2000, George Carlson started Carlson Realty. The company is a sole-proprietorship.This
assignment requires you to record the transactions for the first month of operations in the accounting
system.
Jun. 1
Jun. 2
Jun. 4
George invested $8,000 in the business.
Supplies were purchased on credit for $520.
Furniture was purchased for $5,500. $2,500 was paid in cash and a note was
signed for the balance.
$250 was paid for the supplies purchased previously.
The business earned sales commissions of $11,000. The customers paid cash.
The receptionist was paid a salary of $2,400 for June.
Rent of $1,400 was paid for June.
The business paid $1,350 for automobile expenses.
$140 was paid for utilities for June.
Supplies costing $135 were used in June.
George withdrew $1,000 for personal use.
Jun. 9
Jun. 11
Jun. 29
Jun. 29
Jun. 30
Jun. 30
Jun. 30
Jun. 30
DATE
ACCOUN
DEBIT
CREDIT
T
2000
Jun. 1
Jun. 2
Jun. 4
Jun. 9
Jun. 11
Jun. 29
Jun. 29
Jun. 30
Jun. 30
Jun. 30
Jun. 30
Cash
George, Capital
Supplies
Accounts Payable
Furniture
Cash
Notes Payable
Accounts Payable
Cash
Cash
Service Revenue
Salaries Expense
Cash
Rent Expense
Cash
Automobile Expense
Cash
Utilities Expense
Cash
Supplies Expense
Supplies
George, Drawings
Cash
8,000
8,000
520
520
5,500
2,500
3,000
250
250
11,000
11,000
2,400
2,400
1,400
1,400
1,350
1,350
140
140
135
135
1,000
1,000
44
Homework Problem 4
Jackie’s Floral Designs
Jackie's Floral Designs sells plants, flowers, and silk and dried arrangements. The company is a soleproprietorship. This assignment requires you to record the transactions for February 2000 in the
accounting system.
Feb. 1
Feb. 5
Feb. 7
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Jackie Simmons started Jackie's Floral Designs by investing $12,500.
Merchandise costing $5,700 was purchased on 30-day credit.
$350 was paid for supplies.
Goods were sold for $8,000. $5,500 was collected in cash.
The cost of the goods sold was $5,000.
Supplies costing $175 were used during February.
Employees were paid $1,200 in wages for February.
A payment of $1,700 was made for the merchandise purchased previously.
A payment of $800 was made for rent for February.
$150 was paid for utilities for February.
Jackie withdrew $500 for personal expenses.
DATE
ACCOUN
DEBIT
CREDIT
T
2000
Feb. 1
Feb. 5
Feb. 7
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Feb. 28
Cash
Jackie, Capital
Inventory
Accounts Payable
Supplies
Cash
Cash
Accounts Receivable
Sales Revenue
Cost of Goods Sold
Inventory
Supplies Expense
Supplies
Wages Expense
Cash
Accounts Payable
Cash
Rent Expense
Cash
Utilities Expense
Cash
Jackie, Drawings
Cash
12,500
12,500
5,700
5,700
350
350
5,500
2,500
8,000
5,000
5,000
175
175
1,200
1,200
1,700
1,700
800
800
150
150
500
500
45
Homework Quiz
Sole-Proprietorships
1.
A business, operated for profit and owned by one person, is called a:
a.
Nonprofit organization
b.
Partnership
c.
Corporation
d.
Sole Proprietorship
2.
A business entity can be organized in one of three major types. They are:
a.
Corporations, partnerships, and sole proprietorships
b.
Corporations, associations, and nonprofit organizations
c.
Profit, nonprofit, and corporate organizations
d.
Institutions, partnerships, and corporations
3.
A sole proprietorship can obtain financial resources from which of the following types of
accounts?
a.
Liabilities
b.
Owner's Equity
c.
Assets
d.
Both a and b
4.
In a sole proprietorship, which of the following accounts reflects the owner's financial position in
the business?
a.
Capital Stock
b.
Retained Earnings
c.
Inventory
d.
Owner's Capital
5.
In a sole proprietorship, the Owner's Capital account balance appears in:
a.
The Owner's Equity section of the balance sheet.
b.
The Asset section of the balance sheet.
c.
The Liability section of the balance sheet.
d.
Both the Asset and Owner's Equity sections of the balance sheet.
6.
Robert Pringle, a sole proprietor, invested $10,000 in his business to fund initial operations. This
transaction will be reflected as a:
a.
Debit to Cash and a credit to Note Payable.
b.
Debit to Cash and a credit to Accounts Receivable.
c.
Debit to Cash and a credit to Robert Pringle, Capital.
d.
Debit to Cash and a credit to Fees Earned.
7.
Robert Pringle, a sole proprietor, borrowed $10,000 from a local bank. It will be repaid with
interest over the next year. This transaction will be reflected as a:
a.
Debit to Cash and a credit to Note Payable.
b.
Debit to Cash and a credit to Accounts Receivable.
c.
Debit to Cash and a credit to Robert Pringle, Capital.
d.
Debit to Cash and a credit to Fees Earned.
46
8.
Robert Pringle, a sole proprietor, repaid $2,000 of the $10,000 he recently borrowed from a local
bank. The payment applied exclusively to the principal borrowed. This transaction will be
reflected as a:
a.
Debit to Note Payable and a credit to Robert Pringle, Capital.
b.
Debit to Note Payable and a credit to Accounts Receivable.
c.
Debit to Note Payable and a credit to Cash.
d.
Debit to Notes Payable and a credit to Fees Earned.
9.
Robert Pringle, a sole proprietor, purchased Supplies on account for $2,500 during June. These
items will be used over the next 18 months. This transaction will be recorded as a:
a.
Debit to Supplies Expense and a credit to Cash.
b.
Debit to Supplies Expense and a credit to Accounts Payable.
c.
Debit to Supplies and a credit to Cash.
d.
Debit to Supplies and a credit to Accounts Payable.
10.
Of the supplies purchased in question #9, $1,500 was used in the current year. The entry
reflecting this consumption will include a:
a.
Debit to Supplies
b.
Debit to Supplies Expense
c.
Credit to Supplies Expense
d.
Credit to Supplies Revenue
11.
Ruth's Computer Consulting, a sole proprietorship, purchased computer supplies and recorded
the acquisition as a debit to the asset account, Supplies. The entry to record the cost of supplies
used during an accounting period is:
a.
Debit Supplies; credit Accounts Payable
b.
Debit Accounts Payable; credit Supplies
c.
Debit Supplies Expense; credit Supplies
d.
Debit Supplies Expense; credit Accounts Payable
12.
Ruth's Computer Consulting, a sole proprietorship, purchased supplies during July of $3,000 and
recorded the acquisition as a debit to the asset account, Supplies. At the end of July, the supplies
on hand at July 31 totaled $2,800. The amount to be recorded as Supplies Expense for July is:
a.
$200
b.
$2,800
c.
$3,000
d.
$5,800
13.
Ruth's Computer Consulting is a sole proprietorship. The balance in her Office Supplies account
on March 1 was $3,200. Supplies purchased during March amounted to $2,800, and the supplies
on hand at March 31 were $2,500. The amount to be used for debited to Supplies Expense on
March 31st is:
a.
$3,500
b.
$2,800
c.
$3,200
d.
$2,500
47
14.
Ruth's Computer Consulting is a sole proprietorship. Her Office Supplies account has a balance
of $1,950 at the beginning of the year and was debited during the year for $5,600, representing
the total of supplies purchased during the year. If $1,500 of supplies is on hand at the end of the
year, the supplies expense to be reported on the income statement for the year is:
a.
$1,500
b.
$1,950
c.
$5,600
d.
$6,050
15.
Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
record this entry, Ruth should include a:
a.
Debit to Computer Equipment of $5,000.
b.
Debit to Computer Equipment for $10,000.
c.
Debit to Computer Equipment of $15,000.
d.
Debit to Computer Expense of $10,000.
16.
Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
record this entry, Ruth should include a:
a.
Credit to Cash for $5,000.
b.
Credit to Cash for $10,000.
c.
Credit to Cash for $15,000.
d.
Credit to Cash for some other amount.
17.
Ruth's Computer Consulting is a sole proprietorship. She recently purchased Computer
Equipment costing $15,000. One third was paid in cash and the remainder was on account. To
record this entry, Ruth should include a:
a.
Credit to Accounts Payable for $5,000.
b.
Credit to Accounts Payable for $10,000.
c.
Credit to Accounts Payable for $15,000.
d.
Credit to Accounts Payable for some other amount.
18.
Ruth's Computer Consulting is a sole proprietorship. During August, she billed clients $12,000
for services rendered on account. To record this entry, Ruth should:
a.
Debit Cash and credit Fees Earned.
b.
Debit Accounts Receivable and credit Fees Earned.
c.
Debit Cash and credit Accounts Receivable.
d.
Debit Fees Earned and credit Cash.
19.
Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients
$15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable.
Ruth's entries for September should include a:
a.
Debit to Cash for $5,000.
b.
Debit to Cash for $10,000.
c.
Debit to Cash for $15,000.
d.
Debit to Cash for $25,000.
48
20.
Ruth's Computer Consulting is a sole proprietorship. During September, she billed clients
$15,000 for services rendered and received $10,000 in payment of prior Accounts Receivable.
Ruth's entries for September should include a:
a.
Debit to Accounts Receivable for $5,000.
b.
Debit to Accounts Receivable for $10,000.
c.
Debit to Accounts Receivable for $15,000.
d.
Debit to Accounts Receivable for $25,000.
21.
A business paid $800 for rent. To record this transaction:
a.
Rent Expense must be credited; Cash must be debited
b.
Rent Expense must be debited; Cash must be credited
c.
Cash debited; Rent Revenue must be credited
d.
Cash credited; Rent Revenue must be debited
22.
A sole-proprietorship and its owners are distinct entities:
a.
From a legal standpoint
b.
From an accounting standpoint
c.
From an accounting and legal standpoint
d.
None of the above
23.
The account used by sole-proprietorships to record owner investments is:
a.
Capital
b.
Retained Earnings
c.
Capital Stock
d.
Drawings
24.
A business paid $100 to buy supplies. To record this transaction:
a.
Supplies Expense must be credited
b.
Supplies must be debited
c.
Supplies must be credited
d.
None of the above
25.
To record the payment of cash for inventory purchased on credit earlier:
a.
Accounts Payable must be debited
b.
Accounts Payable must be credited
c.
Accounts Receivable must be debited
d.
Accounts Receivable must be credited
26.
The account used to record withdrawals of cash by owners of sole-proprietorships is:
a.
Capital
b.
Retained Earnings
c.
Capital Stock
d.
Drawings
49
27.
Owner investments in sole-proprietorships are recorded by:
a.
Debiting Capital; crediting Cash
b.
Debiting Cash; crediting Capital
c.
Debiting Capital Stock; crediting Cash
d.
Debiting Cash; crediting Capital Stock
28.
Which of the following accounts are increased by credits?
a.
Supplies
b.
Accounts Receivable
c.
Inventory
d.
Revenue
29.
Withdrawals of cash by owners of sole-proprietorships is recorded by:
a.
Debiting Drawings; crediting Cash
b.
Debiting Cash; crediting Drawings
c.
Debiting Dividends; crediting Cash
d.
Debiting Cash; crediting Dividends
30.
A business paid salaries of $1,800 for November. To record this transaction:
a.
Salaries Expense must be credited
b.
Salaries Expense must be debited
c.
Cash must be debited
d.
None of the above
50
MODULE 2
Corporations
Demonstration Problem 1
Music Stop
This example analyzes the transactions for Music Stop for April 2000. The company is a corporation.
The transactions are recorded in the general journal and posted to the general ledger.
Apr. 2
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 11
Apr. 17
Apr. 22
Apr. 24
Apr. 30
DATE
2000
Apr. 2
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 11
Apr. 17
Apr. 22
Apr. 24
Apr. 30
Music Stop issued stock for $10,000.
The company signed a two year note for $40,000.
Merchandise costing $20,000 was purchased on credit.
The company paid $12,000 for equipment.
Goods were sold to customers for $5,500.
The cost of the goods sold in the previous transaction was $3,000.
Employees were paid $1,000 in wages.
The company paid the utility bill of $100.
A payment of $5,000 was made for the merchandise purchased previously.
Music Stop declared and paid dividends of $1,000.
ACCOUNT
Cash
Capital Stock
Cash
Notes Payable
Inventory
Accounts Payable
Equipment
Cash
Cash
Sales Revenue
Cost of Goods Sold
Inventory
Wages Expense
Cash
Utilities Expense
Cash
Accounts Payable
Cash
Dividends
Cash
DEBIT
CREDIT
10,000
10,000
40,000
40,000
20,000
20,000
12,000
12,000
5,500
5,500
3,000
3,000
1,000
1,000
100
100
5,000
5,000
1,000
1,000
51
Practice Problem 1
Downtown Fitness Center
This assignment lists some typical transactions for Downtown Fitness Center for April 2000. After
analyzing the transactions, you must record them in the general journal.
Apr. 2
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 15
Apr. 17
Apr. 28
Apr. 30
$5,000 was borrowed from a bank.
Purchased equipment on credit for $10,000.
Purchased supplies for $200. Paid cash.
Services were provided to customers on credit for $3,500.
Paid the utilities bill of $105 for April.
Paid employees’ salaries of $1,000 for April.
Rent of $600 was paid for April.
$2,500 was paid to the supplier for the equipment purchased previously.
$1,500 was collected from customers for services provided previously
DATE
2000
Apr. 2
Apr. 2
Apr. 4
Apr. 9
Apr. 11
Apr. 15
Apr. 17
Apr. 28
Apr. 30
ACCOUNT
Cash
Notes Payable
Equipment
Accounts Payable
Supplies
Cash
Accounts Receivable
Service Revenue
Utilities Expense
Cash
Salaries Expense
Cash
Rent Expense
Cash
Accounts Payable
Cash
Cash
Accounts Receivable
DEBIT
CREDIT
5,000
5,000
10,000
10,000
200
200
3,500
3,500
105
105
1,000
1,000
600
600
2,500
2,500
1,500
1,500
52
Practice Assignment 2
O’Grady Building Supplies
This assignment analyzes the transactions for O'Grady Building Supplies for July 2000. This companyt
is a corporation. After analyzing the transactions, you must record them in the general journal.
July 1
July 2
July 5
July 31
July 31
July 31
July 31
July 31
The owners started the business by investing $50,000. O’Grady Building
Supplies issued stock for $50,000.
The business purchased inventory on credit for $22,500.
The business purchased supplies for $500.
Goods were sold to customers for $18,000. The customers paid cash.
The cost of goods sold for the month was $13,500.
Supplies costing $100 was used during the month.
Rent of $1,800 was paid for July.
$6,000 was paid to suppliers for inventory purchased previously.
DATE
2000
Jul. 1
Jul. 2
Jul. 5
Jul. 31
Jul. 31
Jul. 31
Jul. 31
Jul. 31
ACCOUNT
DEBIT
Cash
Capital Stock
50,000
Inventory
Accounts Payable
22,500
Supplies
Cash
50,000
22,500
500
500
Cash
Sales Revenue
18,000
Cost of Goods Sold
Inventory
13,500
Supplies Expense
Supplies
CREDIT
18,000
13,500
100
100
Rent Expense
Cash
1,800
Accounts Payable
Cash
6,000
1,800
6,000
53
Homework Problem 1
Osborne Office Supplies
This assignment lists some typical transactions for Osborne Office Supplies for January 2000. You have
to record each transaction in the general journal.
Jan. 1
Jan. 2
Jan. 4
Jan. 4
Jan. 11
Jan. 11
Jan. 17
Jan. 18
Jan. 22
Jan. 28
Jan. 29
$15,000 was borrowed by issuing a note payable.
Merchandise costing $3,000 was purchased on credit.
Office supplies were sold to customers on credit for $2,000.
The cost of the supplies sold was $1,100.
Goods were sold to customers for $2,700 for cash.
The cost of the goods sold in the previous transaction was $1,400.
Paid $2,000 to the supplier for the merchandise purchased previously.
$600 of accounts receivable was collected.
Rent of $600 was paid for January.
$100 was paid for utilities for January.
Employees were paid $800 for wages.
DATE
2000
Jan. 1
Jan. 2
Jan. 4
Jan. 4
Jan. 11
Jan. 11
Jan. 17
Jan. 18
Jan. 22
Jan. 28
Jan. 29
ACCOUNT
Cash
Notes Payable
Inventory
Accounts Payable
Accounts Receivable
Sales Revenue
Cost of Goods Sold
Inventory
Cash
Sales Revenue
Cost of Goods Sold
Inventory
Accounts Payable
Cash
Cash
Accounts Receivable
Rent Expense
Cash
Utilities Expense
Cash
Wages Expense
Cash
DEBIT
CREDIT
15,000
15,000
3,000
3,000
2,000
2,000
1,100
1,100
2,700
2,700
1,400
1,400
2,000
2,000
600
600
600
600
100
100
800
800
54
Homework Problem 2
Discount Books
This assignment lists some transactions for Discount Books for September 2000. You have to analyze
the accounts affected by each transaction and record it in the general journal.
Sept. 1
Sept. 2
Sept. 5
Sept. 5
Sept. 9
Sept. 12
Sept. 16
Sept. 16
Sept. 22
Sept. 28
Boston Bank loaned the firm $16,000 in exchange for the firm's one year note payable.
Merchandise costing $8,000 was purchased on 30-day credit.
Goods were sold for $3,000 in cash.
The cost of the goods sold was $2,000.
Employees were paid $1,000 in wages.
A payment of $2,000 was made for the merchandise purchased previously.
Goods were sold for cash totaling $4,500.
The cost of the goods sold was $3,000.
$1,800 of notes payable was paid.
A payment of $800 was made for rent.
DATE
ACCOUN
DEBIT
CREDIT
T
2000
Sept. 1
Sept. 2
Sept. 5
Sept. 5
Sept. 9
Sept. 12
Sept. 16
Sept. 16
Sept. 22
Sept. 28
Cash
Notes Payable
16,000
16,000
Inventory
Accounts Payable
8,000
Cash
Sales Revenue
3,000
Cost of Goods Sold
Inventory
2,000
Wages Expense
Cash
1,000
Accounts Payable
Cash
2,000
Cash
Sales Revenue
4,500
Cost of Goods Sold
Inventory
3,000
Notes Payable
Cash
1,800
Rent Expense
Cash
800
8,000
3,000
2,000
1,000
2,000
4,500
3,000
1,800
800
55
Homework Problem 3
The Audio Exchange
The Audio Exchange sells used audio equipment and provides repair services. Below are the
transactions occurring during November 2000. This assignment requires you to prepare journal entries
for these transactions.
Nov. 1
Nov. 1
Nov. 4
Nov. 7
Nov. 8
Nov. 10
Nov. 12
Nov. 16
Nov. 18
Nov. 24
Nov. 24
Nov. 30
Audio exchange issued stock for $12,000.
Supplies were purchased for $500.
An inventory of audio equipment was purchased on credit for $15,000.
$700 was paid for advertising that appeared in the paper during the month.
$120 was paid for repairs.
$6,000 was paid to the supplier for the inventory purchased earlier.
Services provided to clients for cash totaled $3,300.
Services totaling $2,500 were performed on credit.
Audio equipment was sold to customers for $4,000.
The cost of the equipment sold was $2,500.
$200 of the supplies were used during the month.
Audio Exchange declared and paid dividends of $1,000.
DATE
2000
Nov. 1
Nov. 1
Nov. 4
Nov. 7
Nov. 8
Nov. 10
Nov. 12
Nov. 16
Nov. 18
Nov. 24
Nov. 24
Nov. 30
ACCOUNT
Cash
Capital Stock
Supplies
Cash
Inventory
Accounts Payable
Advertising Expense
Cash
Repairs Expense
Cash
Accounts Payable
Cash
Cash
Service Revenue
Accounts Receivable
Service Revenue
Cash
Sales Revenue
Cost of Goods Sold
Inventory
Supplies Expense
Supplies
Dividends
Cash
DEBIT
CREDIT
12,000
12,000
500
500
15,000
15,000
700
700
120
120
6,000
6,000
3,300
3,300
2,500
2,500
4,000
4,000
2,500
2,500
200
200
1,000
1,000
56
Homework Problem 4
Hoffman Consulting
The transactions for the first month of operations of Hoffman Consulting Inc. are given below. This
assignment requires you to prepare journal entries for these transactions.
Oct. 1
The owners started the business by investing $25,000. Hoffman Consulting Inc. issued
stock for $25,000.
A computer system was purchased for $2,000 on credit.
$400 was paid for office supplies.
Services were performed for $2,500 on credit.
$1,000 was paid for the computer purchased previously.
Services were performed for $8,000. The customers paid cash.
$275 was paid for advertisements in October.
$155 was paid for utilities for October.
Supplies costing $135 were used in October.
Customers paid $1,500 for services performed previously on credit.
$1,800 was paid as rent for the office for October.
Oct. 5
Oct. 10
Oct. 17
Oct. 21
Oct. 31
Oct. 31
Oct. 31
Oct. 31
Oct. 31
Oct. 31
DATE
2000
Oct. 1
Oct. 5
Oct. 10
Oct. 17
Oct. 21
Oct. 31
Oct. 31
Oct. 31
Oct. 31
Oct. 31
Oct. 31
ACCOUNT
Cash
Capital Stock
Computer
Accounts Payable
Supplies
Cash
Accounts Receivable
Service Revenue
Accounts Payable
Cash
Cash
Service Revenue
Advertising Expense
Cash
Utilities Expense
Cash
Supplies Expense
Supplies
Cash
Accounts Receivable
Rent Expense
Cash
DEBIT
CREDIT
25,000
25,000
2,000
2,000
400
400
2,500
2,500
1,000
1,000
8,000
8,000
275
275
155
155
135
135
1,500
1,500
1,800
1,800
57
Homework Quiz
Corporations
1.
Which organizational form allows the business to be a separate, distinct entity from the owners?
a.
Proprietorship
b.
Partnership
c.
Corporation
d.
All of the above
2.
The Retained Earnings account is unique to which of the following forms of business organization?
a.
Partnership
b.
Proprietorship
c.
Corporation
d.
A Retained Earnings account is used in all of the above choices.
3.
The issuance of a cash dividend:
a.
Increases a corporation's retained earnings balance.
b.
Decreases the value of outstanding stock.
c.
Increases the number of shares of outstanding stock.
d.
Decreases a corporation's retained earnings balance.
4.
Which of the following is true of a corporation's Retained Earnings account?
a.
It usually equals cash on hand.
b.
It includes all of the Corporation's Liabilities.
c.
It includes the transfer of dividends declared during the period.
d.
It is shown as a section of the corporation's income statement.
5.
A corporation issuing only one class of stock will usually title it:
a.
Common Stock
b.
Treasury Stock
c.
No-par Stock
d.
Preferred Stock
6.
Bob and Ray recently purchased shares of BR, Incorporated, a corporation, for $100,000 each. This
transaction will consist of the following entries to BR, Incorporated's records:
a.
Debit Accounts Receivable; credit Capital Stock
b.
Debit Cash; credit Accounts Payable
c.
Debit Cash; credit Capital Stock
d.
Debit Accounts Receivable; credit Accounts Payable
7.
Bob and Ray organized BR, Incorporated, a corporation for which they are the only stockholders.
At the end of the first year of operations, they elect to withdraw dividends in the amount of $2,000
each. This transaction will consist of the following entries on BR Incorporated's records:
a.
Debit Drawing; credit Cash
b.
Debit Wages Expense; credit Cash
c.
Debit Capital Stock; credit Cash
d.
Debit Dividends; credit Cash
58
8.
Bob and Ray have just purchased shares of BR, Incorporated, a corporation, for $100,000 each.
This transaction will impact the corporation's Stockholders' Equity by what amount?
a.
$ -0b.
$ 100,000
c.
$ 200,000
d.
Some other amount.
9.
Which of the following properly reflects the transaction to record a Corporation's issuance of stock?
a.
Capital Stock: Credit; Cash: Debit
b.
Capital Stock: Debit; Cash: Debit
c.
Capital Stock: Credit; Cash: Credit
d.
Capital Stock: Debit; Cash: Credit
10.
Which of the following properly reflects a Corporation's issuance of stock on the Capital Stock and
Dividends accounts?
a.
Capital Stock: Increases; Dividends: Decreases
b.
Capital Stock: Increases; Dividends: No effect
c.
Capital Stock: No effect; Dividends: Increases
d.
Capital Stock: Decreases; Dividends: Increases
11.
BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will:
a.
Increase the Cash account.
b.
Increase the Dividends account.
c.
Increase the Capital Stock account.
d.
Decrease the Capital Stock account.
12.
BR, Incorporated, a corporation, pays $4,000 in dividends. This $4,000 payment will be recorded
as a:
a.
Dividends: Credit; Cash: Debit
b.
Dividends: Debit; Cash: Credit
c.
Dividends: No effect; Cash: No effect
d.
Dividends: Debit; Cash: No effect
13.
BR, Incorporated, a corporation, has a $100,000 Capital Stock balance at the beginning of the year.
Additional Common Stock of $45,000 was issued during the year. The Capital Stock balance at the
end of the year is:
a.
$ 145,000
b.
$ 100,000
c.
$ 55,000
d.
$ 45,000
14.
BR, Incorporated issued $100,000 in Capital Stock to each of its two shareholders. The
Corporation paid Dividends of $20,000 during the year. The balance in the Capital Stock account at
the end of the year is:
a. $ 220,000
b. $ 200,000
c. $ 120,000
d. $ 100,000
59
15.
Carriage Company, Inc.'s Capital Stock balance was $38,000 on December 31, 2001. Additional
stock of $13,000 was issued during the year. Carriage's Capital Stock balance on January 1, 2001
was:
a.
$51,000
b.
$38,000
c.
$25,000
d
$13,000
16.
StarCo, a newly formed corporation, paid its office rental for the month of April 2001. What
accounts are impacted by this transaction?
a.
Debit Dividends; credit Capital Stock
b.
Debit Rent Revenue; credit Cash
c.
Debit Drawings; credit Capital Stock
d.
Debit Rent Expense; credit Cash
17.
StarCo, a newly formed corporation, purchased Inventory on account from a vendor. What
accounts are impacted by this transaction?
a.
Debit Inventory; credit Cash
b.
Debit Inventory; credit Accounts Payable
c.
Debit Drawings; credit Cash
d.
Debit Drawings; credit Accounts Payable
18.
The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
$200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's
Accounts Receivable account will increase by:
a.
$ -0b.
$ 80,000
c.
$120,000
d.
$200,000
19.
The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
$200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, Joe's
Revenue account will increase by:
a.
$ -0b.
$ 80,000
c.
$120,000
d.
$200,000
20.
The corporation, Joe's Discount Furniture, recorded sales for the month of May 2001 amounting to
$200,000. Sixty percent (60%) of these sales were on account. As a result of this transaction, how
will the following accounts be impacted?
a.
Cash: $ -0-; Capital Stock: $200,000 increase
b.
Cash: $ 80,000 increase; Capital Stock: No effect
c.
Cash: $120,000 increase; Capital Stock: No effect
d.
Cash: $200,000 increase; Capital Stock: $200,000 increase
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21.
A corporation and its' owners are distinct entities:
a.
From a legal standpoint
b.
From an accounting standpoint
c.
From an accounting and legal standpoint
d.
None of the above
22.
After analyzing a transaction, it is recorded in:
a.
The general ledger
b.
The general journal
c.
T-accounts
d.
Trial balance
23.
The account used by corporations to record owner investments is:
a.
Capital
b.
Retained Earnings
c.
Capital Stock
d.
Drawings
24.
Which of the following accounts is debited for increases?
a.
Capital
b.
Retained Earnings
c.
Capital Stock
d.
Dividends
25.
The account used by corporations to record reinvested profits is:
a.
Capital
b.
Retained Earnings
c.
Capital Stock
d.
Drawings
26.
Which of the following accounts is debited for decreases?
a.
Capital
b.
Cash
c.
Dividends
d.
Drawings
27.
To record the repayment of a loan to a creditor:
a.
Notes Payable must be credited
b.
Cash must be debited
c.
Notes Payable must be debited
d.
Both a and b are correct
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28.
Owner investments in corporations are recorded by:
a.
Debiting Capital; crediting Cash
b.
Debiting Cash; crediting Capital
c.
Debiting Capital Stock; crediting Cash
d.
Debiting Cash; crediting Capital Stock
29.
To record the sale of goods to customers on credit:
a.
Accounts Payable must be debited
b.
Accounts Payable must be credited
c.
Accounts Receivable must be debited
d.
Accounts Receivable must be credited
30.
The distribution of cash to investors of corporations are recorded by:
a.
Debiting Drawings; crediting Cash
b.
Debiting Cash; crediting Drawings
c.
Debiting Dividends; crediting Cash
d.
Debiting Cash; crediting Dividends
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