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ACCOUNTING QUESTIONS, ANSWERS & EXPLANATIONS

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hich of the following types of accounts have a normal credit balance? a. Assets and liabilities b. Liabilities and expenses c. Revenues and liabilities d. Capital and drawing e. Assets and expens... es The correct answer is C. The normal balance for an account is a positive balance. Therefore, accounts increased with a credit (liabilities, capital, revenues) have a normal credit balance.  A credit signifies a decrease in a. drawing b. liabilities c. capital d. revenue e. liabilities and capital The correct answer is A. The rules of double-entry accounting state that assets, drawing, and expenses are increased with a debit. Therefore, a credit would signify a decrease.  For accounting purposes, the business entity should be considered separate from its owners if the entity is a. a corporation b. a sole proprietorship c. a partnership d. a partnership or sole proprietorship e. all of the above The correct answer is E. Under the business entity concept, the activities of a business are recorded separately from the activities of the stakeholders.  The Reynolds Company estimated that the value of its land had increased from $10,000 to $16,000 and thus wrote up the land account to $16,000. Which accounting concept was violated? a. Objectivity concept b. Business entity conceptc. Unit of measure concept d. Full disclosure concept e. Matching concept The correct answer is A. The objectivity concept requires that the accounting records and reports be based upon objective evidence. If recorded amounts were constantly revised for offers, appraisals or opinions, accounting reports would soon become unstable and unreliable.  Which of the following entries records the investment of cash by Tito, owner of a proprietorship? a. Debit Tito, Capital; credit Accounts Receivable b. Debit Cash; credit Tito, Capital c. Debit Tito, Drawing; credit Cash d. Debit Cash; credit Tito, Drawing e. Debit Tito, Cash; credit Revenue The correct answer is B. The rules of double-entry accounting state that assets, drawing, and expenses are increased with a debit and liabilities; capital and revenue are increased with a credit. An owner's investment increases cash and the capital account.  Office supplies were sold by J's Appliance Repair at cost to another repair shop, with cash received. Which of the following entries for J's Appliance Repair records this transaction? a. Office Supplies, debit; Cash, credit b. Office Supplies, debit; Accounts Payable, credit c. Cash, debit; Office Supplies, credit d. Accounts Payable, debit; Office Supplies, credit e. Cash, debit; Accounts Receivable, credit The correct answer is C. The rules of double-entry accounting state that assets, drawing, and expenses are increased with a debit and liabilities; capital and revenue are increased with a credit. Two assets, Cash and Supplies, were affected by this transaction. Cash has increased and Supplies have decreased. [Show More]

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