Identify whether a debit or credit yields the indicated change for each of the following accounts:
a. To increase Store Equipment
f. To decrease Unearned Revenue
b. To increase Owner Withdrawals
g. To decrease Prepaid Insurance
c. To decrease Cash
h. To increase Notes Payable
d. To increase Utilities Expense
i. To decrease Accounts Receivable
e. To increase Fees Earned
j. To increase Owner Capital
QS 2-5
Identifying normal balance
C5
Identify whether the normal balances (in parentheses) assigned to the following accounts are correct
or incorrect.
a. Office supplies (Debit)
d. Wages Expense (Credit)
g. Wages Payable
b. Owner Withdrawals (Credit)
e. Cash (Debit) (Credit)
c. Fees Earned (Debit)
f. Prepaid Insurance (Credit)
h. Building (Debit)
Identify whether the normal balance (in paratheses) assigned to the following accounts are correct?
To determine whether a debit or credit is needed to yield the indicated change for each account, we need to understand the basic rules of debits and credits.
1. Store Equipment:
- To increase Store Equipment, a debit is needed because it is an asset account.
2. Unearned Revenue:
- To decrease Unearned Revenue, a credit is needed because it is a liability account.
3. Owner Withdrawals:
- To increase Owner Withdrawals, a debit is needed because it is a withdrawal of owner's equity.
4. Prepaid Insurance:
- To decrease Prepaid Insurance, a credit is needed because it is an asset account.
5. Cash:
- To decrease Cash, a credit is needed because it is an asset account.
6. Notes Payable:
- To increase Notes Payable, a credit is needed because it is a liability account.
7. Utilities Expense:
- To increase Utilities Expense, a debit is needed because it is an expense account.
8. Accounts Receivable:
- To decrease Accounts Receivable, a credit is needed because it is an asset account.
9. Fees Earned:
- To increase Fees Earned, a credit is needed because it is a revenue account.
10. Owner Capital:
- To increase Owner Capital, a credit is needed because it is owner's equity.
Next, let's identify whether the normal balances assigned to the following accounts are correct or incorrect:
1. Office supplies (Debit):
- Correct. Office supplies is an asset account with a normal debit balance.
2. Wages Expense (Credit):
- Incorrect. Wages Expense should have a normal debit balance, as it is an expense account.
3. Wages Payable:
- Correct. Wages Payable is a liability account and has a normal credit balance.
4. Owner Withdrawals (Credit):
- Incorrect. Owner Withdrawals should have a normal debit balance, as it represents withdrawals of owner's equity.
5. Cash (Debit) (Credit):
- Incorrect. Cash should have a normal debit balance. There is no dual assignment of normal balances.
6. Fees Earned (Debit):
- Incorrect. Fees Earned should have a normal credit balance, as it is a revenue account.
7. Prepaid Insurance (Credit):
- Incorrect. Prepaid Insurance should have a normal debit balance, as it is an asset account.
8. Building (Debit):
- Correct. Building is an asset account with a normal debit balance.
Please note that the normal balances in accounting may vary depending on the accounting system used or specific industry practices.
a. To increase Store Equipment: Debit
To increase Store Equipment, you would debit the Store Equipment account.
b. To increase Owner Withdrawals: Debit
To increase Owner Withdrawals, you would debit the Owner Withdrawals account.
c. To decrease Cash: Credit
To decrease Cash, you would credit the Cash account.
d. To increase Utilities Expense: Debit
To increase Utilities Expense, you would debit the Utilities Expense account.
e. To increase Fees Earned: Credit
To increase Fees Earned, you would credit the Fees Earned account.
f. To decrease Unearned Revenue: Debit
To decrease Unearned Revenue, you would debit the Unearned Revenue account.
g. To decrease Prepaid Insurance: Debit
To decrease Prepaid Insurance, you would debit the Prepaid Insurance account.
h. To increase Notes Payable: Credit
To increase Notes Payable, you would credit the Notes Payable account.
i. To decrease Accounts Receivable: Credit
To decrease Accounts Receivable, you would credit the Accounts Receivable account.
j. To increase Owner Capital: Credit
To increase Owner Capital, you would credit the Owner Capital account.
Identifying normal balance:
a. Office supplies: Debit (Incorrect)
The normal balance for Office supplies is Credit.
d. Wages Expense: Debit (Correct)
g. Wages Payable: Credit (Correct)
b. Owner Withdrawals: Debit (Incorrect)
The normal balance for Owner Withdrawals is Debit.
e. Cash: Debit or Credit (Correct)
The normal balance for Cash can be either Debit or Credit, depending on whether cash is increasing or decreasing.
c. Fees Earned: Credit (Correct)
f. Prepaid Insurance: Debit (Incorrect)
The normal balance for Prepaid Insurance is Credit.
h. Building: Debit (Correct)