Question

For each of the accounts listed, identify a. the side (debit or credit) of the account that makes it increase; b. the normal balance of the account on the trial balance, and c. on what financial statement it appears.

				a.		b.		c.
		Account Name		Increases with Debit or Credit?		Normal balance on a trial balance Debit or Credit?		Appears in which Financial Statement?
1.		Cash		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
2.		Service Revenue		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
3.		Notes Payable		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
4.		Prepaid Insurance		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
5.		Salaries Expense		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
6.		Land		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
7.		Notes Receivable		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
8.		Unearned Revenue		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
9.		N. Owner, Drawings		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
10.		Utilities Expense		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity
11.		Supplies		DebitCredit		DebitCredit		Balance SheetIncome StatementOwner’s Equity

Answer 1

Account name Increases with Debit or Credit? Normal balance on a trial balance Debit or Credit? Debit Credit Cash Service Revenue Debit Credit Appears in Which Financial Statement? Balance Sheet Income Statement Balance Sheet Balance Sheet Credit Debit Credit Debit Notes Payable Prepaid Insurance Salaries Expense Debit Debit 16. Debit Debit Credit 7. Income Statement Balance Sheet Balance Sheet Balance Sheet Debit Debit Credit Land Notes Receivable Unearned Revenue N. Owner, Drawings Utilities Expense Debit Debit Debit Debit Statement of Owner's Equity Income Statement Balance Sheet 11. Supplies Debit Debit

Debit - increases Credit - decreases Assets (cash, prepaid insurance, land, notes receivable, supplies) Prepaid insurance: Insurance paid in advance, expense not yet incurred. Notes receivable: A promissory note that entitles its holder to receive money on a future date. Supplies: Stock of consumable supplies. E.g. office supplies. Liabilities (notes payable, unearned revenue) Debit - decreases Credit - increases Notes payable: A promissory note under which the borrower promises to pay the money back. Unearned revenue: Amounts received in advance for services or goods yet to be provided.

Capital Debit - decreases Credit - increases Drawings account is a contra-capital account. i.e. amount withdrawn are recorded as a debit in this account. This account will have a debit balance. It will be shown as a reduction from owner's capital account in statement of owners' equity. E.g. $400 withdrawn by the owner. Debit Credit Owner's drawings $400 Cash $400 (being cash withdrawn by the owner) Capital $400 Owner's drawings $400 (drawings account closed) Salaries - expense incurred for utilizing the services of employees. Utilities expense: Costs incurred for using utilities such as electricity, water etc. Service revenue: Income earned by providing services. Expenses (salaries expense, utilities expense) Debit - increases Credit - decreases Income (service revenue) Debit - decreases Credit - increases