For Insurance paid for a future period, identify the correct bookkeeping treatment.
Correct answer: D
The unexpired benefit is initially an asset.
Accountancy
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Evaluate the two proposed answers. Which are supported? I. Cash collected from an existing debtor — the correct bookkeeping treatment: Debit equipment and credit the supplier liability. II. Wages earned by workers but unpaid — the correct bookkeeping treatment: Debit depreciation expense and credit accumulated depreciation.
Correct answer: A
I is incorrect: Cash collected from an existing debtor → Debit cash and credit trade receivable. One asset replaces another without creating new revenue. II is incorrect: Wages earned by workers but unpaid → Debit wages expense and credit wages payable. Accrual accounting recognises the expense when incurred.
For Goods sold on credit under a periodic inventory system, identify the correct bookkeeping treatment.
Correct answer: D
Revenue is recognised and the customer owes the business.
Evaluate the two proposed answers. Which are supported? I. Customer advance for a service not yet performed — the correct bookkeeping treatment: Debit cash and credit unearned revenue. II. Rent paid for the current period — the correct bookkeeping treatment: Debit prepaid insurance and credit cash.
Correct answer: A
I is correct: Customer advance for a service not yet performed → Debit cash and credit unearned revenue. Receipt alone does not mean the service revenue has been earned. II is incorrect: Rent paid for the current period → Debit rent expense and credit cash. The payment relates to a consumed current-period service.
For Depreciation recorded using an accumulated account, identify the correct bookkeeping treatment.
Correct answer: D
The credit is a contra-asset rather than a cash payment.
Evaluate the two proposed answers. Which are supported? I. Equipment bought on credit — the correct bookkeeping treatment: Debit wages expense and credit wages payable. II. Cash introduced by the owner — the correct bookkeeping treatment: Debit purchases and credit cash.
Correct answer: A
I is incorrect: Equipment bought on credit → Debit equipment and credit the supplier liability. An asset and a liability arise together. II is incorrect: Cash introduced by the owner → Debit cash and credit capital. The business receives an asset and owes a greater residual interest to its owner.
For Wages earned by workers but unpaid, identify the correct bookkeeping treatment.
Correct answer: C
Accrual accounting recognises the expense when incurred.
Evaluate the two proposed answers. Which are supported? I. A bad debt written off without a prior allowance — the correct bookkeeping treatment: Debit bad debt expense and credit the receivable. II. Customer advance for a service not yet performed — the correct bookkeeping treatment: Debit bad debt expense and credit the receivable.
Correct answer: A
I is correct: A bad debt written off without a prior allowance → Debit bad debt expense and credit the receivable. The irrecoverable asset is removed. II is incorrect: Customer advance for a service not yet performed → Debit cash and credit unearned revenue. Receipt alone does not mean the service revenue has been earned.
For Goods bought for cash under a periodic inventory system, identify the correct bookkeeping treatment.
Correct answer: D
Purchases increase while cash decreases.
Evaluate the two proposed answers. Which are supported? I. Cash withdrawn by the owner for personal use — the correct bookkeeping treatment: Debit drawings and credit cash. II. Depreciation recorded using an accumulated account — the correct bookkeeping treatment: Debit depreciation expense and credit accumulated depreciation.
Correct answer: C
I is correct: Cash withdrawn by the owner for personal use → Debit drawings and credit cash. Owner withdrawals reduce equity rather than operating profit. II is correct: Depreciation recorded using an accumulated account → Debit depreciation expense and credit accumulated depreciation. The credit is a contra-asset rather than a cash payment.
For Rent paid for the current period, identify the correct bookkeeping treatment.
Correct answer: A
The payment relates to a consumed current-period service.
Evaluate the two proposed answers. Which are supported? I. Equipment bought on credit — the correct bookkeeping treatment: Debit wages expense and credit wages payable. II. Interest earned but not yet received — the correct bookkeeping treatment: Debit interest receivable and credit interest income.
Correct answer: D
I is incorrect: Equipment bought on credit → Debit equipment and credit the supplier liability. An asset and a liability arise together. II is correct: Interest earned but not yet received → Debit interest receivable and credit interest income. Accrual recognises income before collection.
Evaluate the two proposed answers. Which are supported? I. Goods sold on credit under a periodic inventory system — the correct bookkeeping treatment: Debit trade receivable and credit sales. II. Cash collected from an existing debtor — the correct bookkeeping treatment: Debit cash and credit trade receivable.
Correct answer: C
I is correct: Goods sold on credit under a periodic inventory system → Debit trade receivable and credit sales. Revenue is recognised and the customer owes the business. II is correct: Cash collected from an existing debtor → Debit cash and credit trade receivable. One asset replaces another without creating new revenue.
For Cash introduced by the owner, identify the correct bookkeeping treatment.
Correct answer: D
The business receives an asset and owes a greater residual interest to its owner.
Evaluate the two proposed answers. Which are supported? I. Customer advance for a service not yet performed — the correct bookkeeping treatment: Debit cash and credit unearned revenue. II. Depreciation recorded using an accumulated account — the correct bookkeeping treatment: Debit depreciation expense and credit accumulated depreciation.
Correct answer: A
I is correct: Customer advance for a service not yet performed → Debit cash and credit unearned revenue. Receipt alone does not mean the service revenue has been earned. II is correct: Depreciation recorded using an accumulated account → Debit depreciation expense and credit accumulated depreciation. The credit is a contra-asset rather than a cash payment.
Evaluate the two proposed answers. Which are supported? I. Insurance paid for a future period — the correct bookkeeping treatment: Debit cash and credit unearned revenue. II. Wages earned by workers but unpaid — the correct bookkeeping treatment: Debit wages expense and credit wages payable.
Correct answer: D
I is incorrect: Insurance paid for a future period → Debit prepaid insurance and credit cash. The unexpired benefit is initially an asset. II is correct: Wages earned by workers but unpaid → Debit wages expense and credit wages payable. Accrual accounting recognises the expense when incurred.
For Interest earned but not yet received, identify the correct bookkeeping treatment.
Correct answer: A
Accrual recognises income before collection.
Evaluate the two proposed answers. Which are supported? I. Goods sold on credit under a periodic inventory system — the correct bookkeeping treatment: Debit trade receivable and credit sales. II. Goods bought for cash under a periodic inventory system — the correct bookkeeping treatment: Debit purchases and credit cash.
Correct answer: D
I is correct: Goods sold on credit under a periodic inventory system → Debit trade receivable and credit sales. Revenue is recognised and the customer owes the business. II is correct: Goods bought for cash under a periodic inventory system → Debit purchases and credit cash. Purchases increase while cash decreases.
For Cash collected from an existing debtor, identify the correct bookkeeping treatment.
Correct answer: B
One asset replaces another without creating new revenue.
Evaluate the two proposed answers. Which are supported? I. Cash introduced by the owner — the correct bookkeeping treatment: Debit purchases and credit cash. II. Customer advance for a service not yet performed — the correct bookkeeping treatment: Debit bad debt expense and credit the receivable.
Correct answer: D
I is incorrect: Cash introduced by the owner → Debit cash and credit capital. The business receives an asset and owes a greater residual interest to its owner. II is incorrect: Customer advance for a service not yet performed → Debit cash and credit unearned revenue. Receipt alone does not mean the service revenue has been earned.
Evaluate the two proposed answers. Which are supported? I. Insurance paid for a future period — the correct bookkeeping treatment: Debit unearned revenue and credit service revenue. II. Rent paid for the current period — the correct bookkeeping treatment: Debit rent expense and credit cash.
Correct answer: A
I is incorrect: Insurance paid for a future period → Debit prepaid insurance and credit cash. The unexpired benefit is initially an asset. II is correct: Rent paid for the current period → Debit rent expense and credit cash. The payment relates to a consumed current-period service.
For Equipment bought on credit, identify the correct bookkeeping treatment.
Correct answer: D
An asset and a liability arise together.
Evaluate the two proposed answers. Which are supported? I. Interest earned but not yet received — the correct bookkeeping treatment: Debit interest receivable and credit interest income. II. Goods bought for cash under a periodic inventory system — the correct bookkeeping treatment: Debit trade receivable and credit sales.
Correct answer: A
I is correct: Interest earned but not yet received → Debit interest receivable and credit interest income. Accrual recognises income before collection. II is incorrect: Goods bought for cash under a periodic inventory system → Debit purchases and credit cash. Purchases increase while cash decreases.
For Cash withdrawn by the owner for personal use, identify the correct bookkeeping treatment.
Correct answer: D
Owner withdrawals reduce equity rather than operating profit.
Evaluate the two proposed answers. Which are supported? I. Equipment bought on credit — the correct bookkeeping treatment: Debit equipment and credit the supplier liability. II. Customer advance for a service not yet performed — the correct bookkeeping treatment: Debit cash and credit unearned revenue.
Correct answer: C
I is correct: Equipment bought on credit → Debit equipment and credit the supplier liability. An asset and a liability arise together. II is correct: Customer advance for a service not yet performed → Debit cash and credit unearned revenue. Receipt alone does not mean the service revenue has been earned.