2024 – 1 Debit refers to the right side of the T account and credit refers to the

1. Debit refers to the right side of the T-account, and credit refers to the left side.  

 

        True 

        False    

 

2. A chart of accounts is the book holding all of the company’s accounts.  

 

        True 

        False 

 

3. A business renders service to a client and sends out a sales invoice.  The amount will be collected from the customer at a later time. Which of the following would be TRUE at the time when the invoice is sent out? 

 

        Owner’s equity will decrease.

        Total liabilities will increase.

        Total assets will decrease.

        Net income will increase. 

 

4. Net income is $29,000. Beginning capital balance was $34,000. Ending capital balance was $55,000. No capital contributions were made by the owner during the year.  What amount of drawings was made? 

 

        $18,000

        $ 8,000   

        $ 5,000

        $60,000 

 

5. A business settles a liability by making a payment with cash. How does paying this liability affect the accounting equation?

 

        Assets decrease; liabilities decrease.

        Liabilities decrease; owner’s equity increases.

        Assets increase; liabilities increase.

        Assets increase; liabilities decrease. 

 

6. The following transactions have been journalized and posted to the proper accounts.

 

• Mark Call invested $7,000 cash in his new design services business. 

• The business paid the first month’s rent of $700. 

• The business purchased equipment by paying $2,000 cash and executing a note payable for $4,500. 

• The business purchased supplies for $850 cash. 

• The business billed a client for $4,000 of design services completed. 

• The business received $3,000 of the account for the completed services. 

 

What is the balance in Cash?

 

        $7,850

        $6,450   

        $8,450

        $8,150

        None of these is correct

 

7. By definition, which of the following represents the owners of a corporation?  

 

        Customers

        Creditors

        Stockholders

        Employees 

 

8. An account that normally has a debit balance may occasionally have a credit balance

 

        True 

        False 

 

9. The business receives cash from a customer that is owed to the company “on account,” based on services rendered to the customer previously. How does the collection of the cash affect the accounting equation? 

 

        Assets increase; owner’s equity increases.

        Assets increase; liabilities increase.

        One asset increases; one asset decreases.

        Assets decrease; owner’s equity decreases. 

 

10. Which of the following accounts decreases with a credit? 

 

        Cash

        Capital

        Accounts payable

        Notes Payable