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Question 1

What does DEBIT include?

Answer 1

Assets, Withdrawals, Expenses

DEBIT entries increase assets, withdrawals, and expenses.

Question 2

What does CREDIT include?

Answer 2

Liabilities, Capital, Revenue

CREDIT entries increase liabilities, capital, and revenue.

Question 3

What is UNEARNED REVENUE?

Answer 3

Money received for services not yet performed

It is initially recorded as a liability.

Question 4

What is the UNADJUSTED entry for UNEARNED REVENUE?

Answer 4

Cash, Unearned Revenue

This reflects the cash received before the service is performed.

Question 5

What is the ADJUSTED entry for UNEARNED REVENUE?

Answer 5

Unearned Revenue, Service Revenue

This reflects the recognition of revenue once the service is performed.

Question 6

What is the UNADJUSTED entry for PREPAID EXPENSES?

Answer 6

Prepaid Rent, Cash

This reflects the payment made for future rent.

Question 7

What is the ADJUSTED entry for PREPAID EXPENSES?

Answer 7

Rent Expense, Prepaid Rent

This reflects the recognition of rent expense over time.

Question 8

What is the formula for calculating the final count of OFFICE SUPPLIES?

Answer 8

(Beginning count + Purchases) – Expenses

This formula is used to determine the remaining office supplies after accounting for usage.

Question 9

What is the UNADJUSTED entry for ACCRUED REVENUE?

Answer 9

Notes Receivable, Service Revenue

This reflects revenue earned but not yet received.

Question 10

What is the ADJUSTED entry for ACCRUED REVENUE when INTEREST is included?

Answer 10

Interest Receivable, Interest Revenue

This reflects the interest revenue earned but not yet received.

Question 11

What is the ADJUSTED entry for ACCRUED REVENUE when NR & INTEREST are paid?

Answer 11

Cash, Interest Receivable, Notes Receivable

This reflects the cash received for both notes and interest.

Question 12

What is the UNADJUSTED entry for ACCRUED EXPENSE?

Answer 12

Notes Payable, X (whatever was purchased)

This reflects expenses incurred but not yet paid.

Question 13

What is the ADJUSTED entry for ACCRUED EXPENSE when INTEREST is included?

Answer 13

Interest Expense, Interest Payable

This reflects interest expense that has accrued but not yet been paid.

Question 14

What is the formula for calculating Simple Interest?

Answer 14

Interest = Principal * Rate * Time

Interest rates are typically on a per annum basis unless stated otherwise.

Question 15

What does DEPRECIATION refer to in accounting?

Answer 15

Allocation of the cost of a fixed asset over its useful life

This reflects the wear and tear of assets over time.

Question 16

What is the UNADJUSTED entry for DEPRECIATION?

Answer 16

X (fixed asset bought), Cash/NP/AP

This reflects the initial purchase of the fixed asset.

Question 17

What is the ADJUSTED entry for DEPRECIATION?

Answer 17

Depreciation Expense – X (fixed asset bought), Accumulated Depreciation – X (fixed asset)

This reflects the recognition of depreciation expense.

Question 18

What is the formula for STRAIGHT-LINE DEPRECIATION?

Answer 18

Depreciation Expense = (Cost - Residual Value) / Useful Life

This method spreads the cost evenly over the asset’s useful life.

Question 19

What is the UNADJUSTED entry for BAD DEBTS?

Answer 19

Accounts Receivable, Service Revenue

This reflects the revenue expected from customers who may not pay.

Question 20

What is the ADJUSTED entry for BAD DEBTS?

Answer 20

Bad Debts Expense, Allowance for Doubtful Accounts

This reflects the estimated uncollectible accounts.

Question 21

How are BAD DEBTS usually reported?

Answer 21

As an AMOUNT or a PERCENTAGE of the Accounts Receivable

This estimation helps in financial reporting.