Origin of the concept of debits and credits
Luca Pacioli, a Franciscan friar, invented the double-entry accounting method. Since the accounting method he developed is still used today, Pacioli has been dubbed the "Father of Accounting." Pacioli advised against ending a workday until your debits and credits were equal. So there are fewer opportunities for fundamental mistakes.
Introduction
When entering transactions in the accounting records, bookkeepers and accountants use the phrases "debits" and "credits." You must debit one account and credit another each time you make a transaction in your business's books (right side of the account). The double-entry accounting system ensures the accuracy of financial statements and accounting records.
Meaning
You must debit and credit at least one account after identifying the two or more accounts involved in a commercial transaction. Debiting a bank account is the process of adding money to the account from the left side. An account can be credited by entering a sum on the right-hand side of it. Debits and credits are applied to the account based on asset value changes, for example. When liabilities or shareholders' equity are increased, they represent debits to the account.
Debit is referred to as dr, whereas credit is referred to as cr.
Conclusion
Since something must be paid for the growth in assets, the account is debited (the price of the asset). Increased obligations are a credit on the other hand, as they represent money that you borrowed from someone else and then used to make a transaction (the cause of the corresponding debit in the assets account).
Following are some of the multiple choice questions on the Debits and Credits with answers that will help the students in developing their knowledge.
Debits and Credits MCQ
1. Normal balance of Sales
2. Which is a disadvantage of a credit card?
3. Accounts Payable is increased by $1000
4. Normal balance of owner's capital account
5. Which of the following financial statements show accounts receivable?
6. How often is a profit and loss statement issued?
7. Identify the correct reporting of the following transaction: Received $600 for services performed
8. All of the following statements are correct, except for?
9. Normal balance of Cash
10. Normal balance of Rent Expense
11. Normal balance of Supplies
12. A debit card is essentially a paper check but doesn't require the processing time a check does.
13. A debit card is handy in an emergency when you don't have the money to spend.
14. A debit card is a buy-now, pay-later payment type with a grace period for payments.
15. You order your favorite sandwich with chips and a drink using your debit card. The total comes to $5.68. Your online statement shows a charge of $40.68. The extra amount is an overdraft fee.
16. Internet banking means using a bank branch to make deposits and withdrawals.
17. ________________________ accounts include capital, drawing, revenue, and expenses
18. When cash is received you should debit cash
19. Notes Payable decreased by $20,000
20. Permanent accounts are closed at the end of the accounting year.
21. Generally the following types of accounts are increased with a credit: Gains, Income, Revenues, Liabilities, and Stockholders Equity
22. The following accounts are increased with a debit: Dividends, Expenses, Assets, and Losses
23. Debit transaction occur on the right hand side of the t account.
24. There must be both a debit and credit in any transaction
25. Double entry accounting may affect more than two accounts.
26. Assets 23,000 Owners Equity $10000. What are liabilities
27. Assets 10,000 Owners Equity 6,000. What is Liabilities?
28. Liabilities 3,000 + Owners Equity 8,000. What is Equity
29. Temporary accounts include revenue accounts, expense accounts, owner draw account, and income summary.
30. ______________ every business transaction is recorded in a least two account.
31. You got the lead in the school play. Your mom stops at the ATM to get $50 from her savings account then takes you to the fabric store to get supplies to make your costume.
32. Your dog has to go to the vet for his rabies vaccination. Your mom pays with a card. The cost of the visit to the vet shows up on her monthly bill.
33. It’s the end of August and you need school supplies. Your mom pays for them with her card. The bill for your school supplies shows up on her monthly card statement. It is small enough to pay now so she does not have to pay interest.
34. You made the softball team. YEAH!!! Dad takes you to buy a uniform. He pays for the purchase with a card, enters his PIN and gets $20 in cash back from his checking account.
35. Your dad goes to the gas station, fills up the car with gas and pays with his card. He will get a bill at the end of the month for the gas.
36. Your family is on vacation and you need more cash. Your dad goes to the ATM and gets a $500 cash advance. He says, “Just one more vacation expense we’ll have to pay off when we get home.”
37. Your mom buys groceries and pays with a card. She also gets $30 in cash from her checking account at the bank at the same time.
38. Your aunt buys you a new outfit for the first day of school. She pays with a card and tells you she’ll pay for it at the end of the month when she gets her bill.
39. Your grandmother takes you out for pizza for your birthday. She pays with a card and money for the bill comes out of her checking account.
40. Your mom goes to the ATM at the bank and withdraws $300 from her savings account with her card.
42. Money is withdrawn directly from a checking or savings account.
43. Hefty fees may be charged if you spend more than what is in the account.
44. Interest may be charged but can be avoided by paying the entire balance each month.
45. Great for emergencies
46. Has perks such as, cash back and rewards
48. May cause unnecessary debt
50. It may require a signature when making a purchase.
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