5 Debit and Credit Practice Questions & Solutions

in this video I'm going to take you through by practice questions on debits and credits that will help pay you for anything hey viewers welcome to accounting stuff I'm James and today we're gonna dive right into some debit and credit practice problems I floated the idea of doing this kind of thing a couple of weeks ago and you guys seem keen so here we go we're going to cover five debit and credit examples and I'm going to show you my thought process that I used to solve each one the technique that I'm about to show you helped me pass my accounting exams way back when so I hope you find this a useful tool to add to your accounting arsenal these questions are going to get progressively more difficult so don't forget to stick around until the end one last thing before we get stuck in for these questions we are going to assume the accrual basis of accounting if you don't know what that means have no fear I've done a video covering it already and there should be a link to it somewhere up here in the corner let's do question 1 the owner of a carwash provides their company with a one thousand dollar initial investment is the entry to the company's cash account a a debit or B a credit the first thing to take note of is that cash is an asset that's the a in dealer now what's dealer here's a little cheat sheet that I made to help us out with these questions dealer is an easy way for us to remember the expanded accounting equation dividends plus expenses plus assets are equal to liabilities plus owner's equity plus revenue the left-hand side of this equation our normal debit accounts these increase when debited and decrease when credited on the right-hand side we have the normal credit accounts these increase when credited and decrease when debited I just said that cash is the a in dealer that makes an asset and those increase when debited and decrease when credited in this question the initial investment causes the company's cash to increase so the answer is a a debit question number two and this follows on from the first one is the entry to owner's equity a debit or a credit there are two ways we can go about solving this in method 1 we use dealer owner's equity is ii ii and dealer so we know that it's a normal credit account that means credits increase it and debits decrease it the owner of the carwash has invested one thousand dollars into the company so owner's equity must have increased by one thousand dollars so we credit owner's equity alternatively we could have used a second method that's a bit quicker we know that in double entry bookkeeping there are two equal and opposite sides to every financial transaction since we've already debited cash in question one we must have to credit owner's equity in order to keep things balanced in question three we're looking at a different transaction the carwash pays a supplier two hundred dollars in cash which account is debited is it a accounts payable or B cash if the carwash is paying a supplier in cash then that means their cash balance has to go down because they've paid it over to the supplier and their accounts payable has to go down to because they're reducing the amount of money they owe to the supplier accounts payable is a form of liability that's the Ellen dealer which makes it a normal credit account so credits increase it and debits decrease it here we want to decrease accounts payable so the answers a we've got to debit it in question for a customer gets their car washed for ten dollars they pay on account with 30 day payment terms which account is credited is it a revenue be cash or CE accounts receivable here we can eliminate cash right away because this transaction doesn't involve cash the customer pays the carwash on an account so they still owe the carwash ten dollars but they have 30 days in order to hand over the money because they've got 30 day credit terms so we are left with revenue or accounts receivable and this transaction represents a sale because a service has been provided to the customer and the revenue recognition principle tells us that we need to recognize this income now because revenue is recognized when it's earned not when cash changes hands revenue is the are in dealer so it's a normal credit account so credits increase it and debits decrease it here we need to increase revenue serving is accredited question number five the following month the car wash receives the ten dollars from the customer which account is credited is it a revenue be cash or see accounts receivable right off the bat we can remove revenue because this transaction doesn't involve revenue we're still applying the revenue recognition principle so the revenue was recognized back when it was earned the previous month and question four so we're left with cash and accounts receivable cash is an asset which is the am dealer so debits increase it and credits decrease it since the car wash has received cash cash needs to be debited to increase it that leaves us with accounts receivable in question for the customer owed to the carwash ten dollars so the carwash needed to recognize an account receivable now that the carwash has received that ten dollars back that balance needs to be reduced down to new accounts receivable are also a form of asset so debits increase it and credits decrease it here we want to reduce our accounts receivable balance so we need to credit it if you found this video useful give it a like share it and comment subscribe if you haven't already how did you find these practice questions today where they're too easy where they too hard I'd love to hear your feedback I put out new videos every Monday accounting stock see you in the next room [Music] you

Channel: Accounting Stuff

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Keywords: accounting, accounting basics, debit credit, debit credit accounting, debit and credit accounting explained, debit credit questions, accounting questions, debit credit test, debit credit examples, debit credit practice, debit credit problems, accounting stuff, practice debits and credits, questions debits and credits, debits and credits practice, debits and credits test, debits and credits examples, debits and credits problems, accounting for beginners, accounting practice

Id: yCOZ7aylC0c

Length: 6min 36sec (396 seconds)

Published: Sun Nov 11 2018