MCQs on Journal Entries

The company provided service to the client; therefore, the company may recognize the revenue as earned , which increases revenue. Service Revenue is a revenue account affecting equity. Revenue accounts increase the process of initially recording a business transaction is called on the credit side; thus, Service Revenue will show an increase of $5,500 on the credit side. In a journal, there are two columns for different accounts, the debit account and the credit account.

Accounting is the process of recording, summarizing, and reporting financial transactions to oversight agencies, regulators, and the IRS. It includes the transaction date, particulars of the transaction, folio number, debit amount, and credit amount. The ledger might be a written record if the company does its accounting by hand or electronic records when it uses accounting software.

CLASSIFY BUSINESS TRANSACTIONS BY ACCOUNT

Cash was used to pay for salaries, which decreases the Cash account. Accounts Payable recognized the liability the company had to the supplier to pay for the equipment. Since the company is now paying off the debt it owes, this will decrease Accounts Payable.

• Such a journal generally consists of profitable and unprofitable trades, watchlists, pre, and post-market conditions, and analysis and notes on each trade being bought or sold.
• Which of the following is not part of the recording process?
• Record the issuance of a short-term note payable of $10,000.
• The titles of the credit accounts will be indented below the debit accounts.
• The process of transferring amounts from a journal to the ledger accounts.

Every business transaction should compulsorily be recorded on two accounts in the double-entry Journalising system at a minimum. The order by date format is used for transactions recorded by the journal in debit and credit format. Hence, the journal transactions will occur in chronological order, with the earliest entry being recorded first. The journal entry for the goods written by the customer will be debited to the sales return of the return inwards account.

What is a trial balance used for?

For example, at December 31, 20X2, the net book value of the truck is $50,000, consisting of $150,000 cost less $100,000 of accumulated depreciation. By the end of the asset’s life, its cost has been fully depreciated and its net book value has been reduced to zero. Customarily the asset could then be removed from the accounts, presuming it is then fully used up and retired. One might find it necessary to “back in” to the calculation of supplies used. Assume $200 of supplies in a storage room are physically counted at the end of the period.

Always subtracting the credits from the debits. Adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum.

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These transactions are initially recorded on source documents, such as invoices or checks. The first step in the accounting process is to analyze each transaction and identify what effect it has on the accounts. After making this determination, an accountant enters the transactions https://accounting-services.net/ in chronological order into a journal, a process called journalizing the transactions. Although many companies use specialized journals for certain transactions, all businesses use a general journal. In this book, the terms general journal and journal are used interchangeably.

• The accounting cycle records and analyzes accounting events related to a company’s activities.
• When we introduced debits and credits, you learned about the usefulness of T-accounts as a graphic representation of any account in the general ledger.
• It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.
• A journal entry can have many meanings, like a journey entry of daily activities of a normal person, etc.
• The difference between the debit and credit totals is $24,800 (32,300 – 7,500).
• To decrease the total cash, credit the account because asset accounts are reduced by recording credit entries.

The expenditure was initially recorded into a prepaid account on the balance sheet. The alternative approach is the “income statement approach,” wherein the Expense account is debited at the time of purchase. The appropriate end-of-period adjusting entry establishes the Prepaid Expense account with a debit for the amount relating to future periods.

To find the account balance, you must find the difference between the sum of all figures on the side that increases and the sum of all figures on the side that decreases. Another key element to understanding the general ledger, and the third step in the accounting cycle, is how to calculate balances in ledger accounts. The customer does not pay immediately for the services but is expected to pay at a future date. This creates an Accounts Receivable for Printing Plus. The customer owes the money, which increases Accounts Receivable. Accounts Receivable is an asset, and assets increase on the debit side.