Question

What is the impact on the accounting equation when a payment of account payable is made?

1. both sides increase
2. both sides decrease
3. only the Asset side changes
4. neither side changes

Which of the following accounts is increased by a debit?

1. Common Stock
2. Accounts Payable
3. Supplies
4. Service Revenue

What is the impact on the accounting equation when an accounts receivable is collected?

1. both sides increase
2. both sides decrease
3. only the Asset side changes
4. the total of neither side changes

Which set of accounts has the same type of normal balance?

1. Cash, accounts payable
2. Prepaid rent, unearned service revenue
3. Dividends, common stock
4. Accounts payable, retained earnings

Answer 1

Answer :

B. both sides decrease

C. Supplies

D. the total of neither side changes

D. Accounts payable, retained earnings

Note:

1. When the payment for account payable is made, there is a decrease in accounts payable balance and hence the liabilities decrease. Also, there is an decrease in the cash balance and hence a decrease in the asset side. Hence, both the sides decreases.

2. Supplies means materials required by any company. When the supplies are debited, it implies there is an increase in them.

3. When the account receivable is collected, there is an increase in the account receivable account and in the cash account. Hence, the total of neither side changes

4. The accounts payable and the retained earnings both have credit balances and hence have both have the same type of normal balance.