Before you begin:For testing and exams it's important to make sure you not only answer questions correctly but also complete them at the right speed. Grab a pen and piece of paper and time yourself while attempting this exercise (or add your answer in the comments section further below).
Difficulty Rating: Beginner
Time limit: 3 minutes
Which accounts will be affected in the following transactions:
1. Receipts from cash costumers, P16, $420.
2. Received bill for gasoline used by the service vehicle during the month, P3, $270.
1. Cash/Bank and Sales (income)
Receipts are the source documents our business has issued that show that we have received money.
As we are receiving money now, it obviously affects our cash/bank. So that is the one account affected.
The other account affected is the income account, as these are cash customers and we are recording the income now.
Note that the question does not state exactly what type of business this is and thus what form of income they get. We have assumed it is a trading business that makes sales. If this was a service business like a doctor, a plumber or an accountant, etc. then we would use the income account services rendered.
Also note that if these were receipts from credit customers who are now paying us, the accounts affected would be different: cash/bank and debtors/receivables (as they are paying down their debt to our business).
2. Gas/Vehicle Expense and Cash/Bank
A bill is another type of source document. Usually when you receive a bill (or invoice) it means you have a creditor/payable and still need to pay the bill. In this case the expense is gasoline, which you pay straight away (you never have a gasoline company as a creditor). So all we are doing here is recording a cash expense, and the two accounts are cash/bank and the expense account of gasoline or vehicle expenses.