About Debits and Credits

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

  • debit
  • credit

2. Which is a disadvantage of a credit card?

  • Credit cards are buy-now, pay later
  • Credit cards provide preapproved credit
  • Credit cards charge interest
  • Credit cards are the best way to pay for something online, because you can dispute a the charge

3. Accounts Payable is increased by $1000

  • Debit
  • Credit

4. Normal balance of owner's capital account

  • debit
  • credit

5. Which of the following financial statements show accounts receivable?

  • Income Statement
  • Statement of Owner's Equity
  • Balance Sheet
  • none of the above

6. How often is a profit and loss statement issued?

  • once in a fiscal period
  • twice in a fiscal period
  • twelve times in a fiscal period
  • anytime in a fiscal period

7. Identify the correct reporting of the following transaction: Received $600 for services performed

  • Debit Bank $600
  • Debit Accounts Receivable $600
  • Debit Bank $600; Credit Service Fees Revenue $600
  • Debit Service Fees Revenue $600; Credit Bank $600;

8. All of the following statements are correct, except for?

  • Assets are debit in nature
  • Expenses are credit in nature
  • Liabilities are credit in nature
  • Revenues are credit in nature

9. Normal balance of Cash

  • debit
  • credit

10. Normal balance of Rent Expense

  • debit
  • credit

11. Normal balance of Supplies

  • debit
  • credit

12. A debit card is essentially a paper check but doesn't require the processing time a check does.

  • True
  • False

13. A debit card is handy in an emergency when you don't have the money to spend.

  • True
  • False

14. A debit card is a buy-now, pay-later payment type with a grace period for payments.

  • True
  • False

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.

  • True
  • False

16. Internet banking means using a bank branch to make deposits and withdrawals.

  • True
  • False

17. ________________________ accounts include capital, drawing, revenue, and expenses

  • Owners Equity
  • Assets
  • Liabilities
  • none of the above

18. When cash is received you should debit cash

  • True
  • False

19. Notes Payable decreased by $20,000

  • Debit
  • Credit

20. Permanent accounts are closed at the end of the accounting year.

  • True
  • False

21. Generally the following types of accounts are increased with a credit: Gains, Income, Revenues, Liabilities, and Stockholders Equity

  • True
  • False

22. The following accounts are increased with a debit: Dividends, Expenses, Assets, and Losses

  • True
  • False

23. Debit transaction occur on the right hand side of the t account.

  • True
  • False

24. There must be both a debit and credit in any transaction

  • True
  • False

25. Double entry accounting may affect more than two accounts.

  • True
  • False

26. Assets 23,000 Owners Equity $10000. What are liabilities

  • 10,000
  • 13,000
  • 23,000
  • none of the above

27. Assets 10,000 Owners Equity 6,000. What is Liabilities?

  • 4,000
  • 6,000
  • 7,000
  • none of the above

28. Liabilities 3,000 + Owners Equity 8,000. What is Equity

  • 11,000
  • 8,000
  • 6,000
  • All of above

29. Temporary accounts include revenue accounts, expense accounts, owner draw account, and income summary.

  • True
  • False

30. ______________ every business transaction is recorded in a least two account.

  • Double Entry Accounting
  • Debit
  • Credit
  • none of the above

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.

  • Debit card
  • Credit card

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.

  • Debit card
  • Credit card

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.

  • Debit card
  • Credit card

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.

  • Debit card
  • Credit card

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.

  • Debit card
  • Credit card

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.”

  • Debit card
  • Credit card

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. 

  • Debit card
  • Credit Card

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. 

  • Debit card
  • Credit card

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. 

  • Debit card
  • Credit Card

40. Your mom goes to the ATM at the bank and withdraws $300 from her savings account with her card. 

  • Debit card
  • Credit Card

41. Affects credit score

  • Debit Card
  • Credit Card
  • Both
  • none of the above

42. Money is withdrawn directly from a checking or savings account.

  • Debit Card
  • Credit Card
  • Both
  • none of the above

43. Hefty fees may be charged if you spend more than what is in the account.

  • Debit Card
  • Credit Card
  • Both
  • All of above

44. Interest may be charged but can be avoided by paying the entire balance each month.

  • Debit Card
  • Credit Card
  • Both
  • All of above

45. Great for emergencies

  • Debit Card
  • Credit Card
  • Both
  • none of the above

46. Has perks such as, cash back and rewards

  • Debit Card
  • Credit Card
  • Both
  • All of above

47. Has fraud protection

  • Debit Card
  • Credit Card
  • Both
  • none of the above

48. May cause unnecessary debt

  • Debit Card
  • Credit Card
  • Both

49. Replaces cash

  • Debit Card
  • Credit Card
  • Both

50. It may require a signature when making a purchase.

  • Debit Card
  • Credit Card
  • Both

Enjoyed the Quiz. Share this with friends

Comments

Add Your Review

Your email address will not be published.

Subscribe to Newsletter!

Subscribe to get latest updates and information.