Book 1 - Chapter 22

Multiple Choice
1.		c
2.		d. The words “debit” and “credit” refer only to location. “Debit” means “left” and “credit” means “right.” They have no other meaning. Whether or not “debit” and “credit” is an increase or decrease depends entirely on which account in the equation is affected. That is the reason why it is so important to first remember the basic rule:
		Accounts on the left side of the equation are increased with left-side (debit) entries, and accounts on the right side of the equation are increased with right-side (credit) entries. Then record decreases on the opposite sides from increases.
		Another common mistake with the words “debit” and “credit” is trying to give them meanings such as “favorable” or “unfavorable” or “give” and “take.”
3.		b
4.		a
5.		b. This is giving up one asset (Accounts Receivable) for another asset (Cash).
6.		c
7.		d
8.		d Debits (left-side entry) decrease liabilities.
9.		a
10.		b
11.		d. Net income (or loss) is simply revenues – expenses: ($44,200 – $37,100 = $7,100)
12.		c
13.		b, because Accounts Payable decreased and Cash decreased.
14.		a, because Cash decreased and Supplies increased.
15.		c, because Cash increased and Unearned Revenue increased.
16.		a, because Cash increased and Accounts Receivable decreased.
17.		d. Equipment increased and Notes Payable increased, so the company purchased equipment and signed a note payable.

Learning Goal 22

SOLUTIONS

Learning Goal 22: “Debits on the left, credits on the right!”

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