Debits and Credits

Question 1

Do you debit or credit an asset to increase it?

Answer 1

Debit.

Question 2

Do you debit or credit a liability to increase it?

Answer 2

Credit.

Question 3

Do you debit or credit equity to increase it?

Answer 3

Credit.

Question 4

Do you debit or credit revenue to increase it?

Answer 4

Credit.

Question 5

Do you debit or credit expenses to increase them?

Answer 5

Debit.

Question 6

Do you debit or credit a “Long-Term Debt” account to increase it?

Answer 6

Credit.

Question 7

What happens when you pay cash for an expense?

Answer 7

Debit the expense account, credit cash.

Question 8

What happens when you make a credit sale?

Answer 8

Debit accounts receivable, credit sales revenue.

Question 9

How do you record depreciation?

Answer 9

Debit depreciation expense, credit accumulated depreciation.

Question 10

What is a contra asset account?

Answer 10

An account that reduces the value of a related asset, e.g., Accumulated Depreciation.

Question 11

Do you debit or credit an asset to increase it?

Answer 11

Debit.

Question 12

Do you debit or credit an asset to decrease it?

Answer 12

Credit.

Question 13

Do you debit or credit a liability to increase it?

Answer 13

Credit.

Question 14

Do you debit or credit a liability to decrease it?

Answer 14

Debit.

Question 15

Do you debit or credit equity to increase it?

Answer 15

Credit.

Question 16

Do you debit or credit equity to decrease it?

Answer 16

Debit.

Question 17

Do you debit or credit revenue to increase it?

Answer 17

Credit.

Question 18

Do you debit or credit revenue to decrease it?

Answer 18

Debit.

Question 19

Do you debit or credit an expense to increase it?

Answer 19

Debit

Question 20

Do you debit or credit an expense to decrease it?

Answer 20

Credit

Question 21

Do you debit or credit a dividend to increase it?

Answer 21

Debit

Question 22

Do you debit or credit a contra asset to increase it?

Answer 22

Credit

Question 23

Do you debit or credit a contra asset to decrease it?

Answer 23

Debit

Question 24

Do you debit or credit retained earnings for a net profit?

Answer 24

Credit

Question 25

Do you debit or credit retained earnings for a net loss?

Answer 25

Debit

Question 26

You buy equipment for cash.

Answer 26

Debit Equipment, Credit Cash.

Question 27

You receive cash from a customer for a prior credit sale.

Answer 27

Debit Cash, Credit Accounts Receivable.

Question 28

You make a credit sale.

Answer 28

Debit Accounts Receivable, Credit Sales Revenue.

Question 29

You pay wages in cash.

Answer 29

Debit Wages Expense, Credit Cash.

Question 30

You borrow money from a bank.

Answer 30

Debit Cash, Credit Loan Payable.

Question 31

You pay off a loan.

Answer 31

Debit Loan Payable, Credit Cash.

Question 32

You purchase inventory on credit.

Answer 32

Debit Inventory, Credit Accounts Payable.

Question 33

You pay a utility bill.

Answer 33

Debit Utilities Expense, Credit Cash.

Question 34

You declare and pay dividends.

Answer 34

Debit Retained Earnings, Credit Cash.

Question 35

You receive unearned revenue (e.g., prepaid service).

Answer 35

Debit Cash, Credit Unearned Revenue.

Question 36

You recognize earned revenue from a previously unearned amount.

Answer 36

Debit Unearned Revenue, Credit Revenue.

Question 37

You record depreciation.

Answer 37

Debit Depreciation Expense, Credit Accumulated Depreciation.

Question 38

You adjust for accrued wages.

Answer 38

Debit Wages Expense, Credit Wages Payable.

Question 39

You prepay insurance.

Answer 39

Debit Prepaid Insurance, Credit Cash.

Question 40

You adjust for insurance used during the period.

Answer 40

Debit Insurance Expense, Credit Prepaid Insurance.

Question 41

You write off bad debt.

Answer 41

Debit Allowance for Doubtful Accounts, Credit Accounts Receivable.

Question 42

You record a capital contribution by an owner.

Answer 42

Debit Cash, Credit Owner’s Capital.

Question 43

Is a debit always an increase?

Answer 43

No — it depends on the account type.

Question 44

What kind of account is “Accumulated Depreciation”?

Answer 44

A contra asset, increased with a credit.

Question 45

What kind of account is “Sales Returns”?

Answer 45

A contra revenue account, increased with a debit.

Question 46

What kind of account is “Drawings”?

Answer 46

A contra equity account, increased with a debit.

Question 47

Are credits always positive?

Answer 47

Not necessarily — credits increase liabilities, equity, and revenue but reduce assets and expenses.

Question 48

What does every journal entry need to balance?

Answer 48

Total debits must equal total credits.

Question 49

What’s the normal balance of an asset account?

Answer 49

Debit.

Question 50

What’s the normal balance of a liability account?

Answer 50

Credit

Question 51

What’s the normal balance of a revenue account?

Answer 51

Credit

Question 52

What’s the normal balance of an expense account?

Answer 52

Debit

Question 53

What’s the normal balance of a capital/retained earnings account?

Answer 53

Credit