BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increases in asset, liability and owners equity accounts are recorded by debits
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Decreases in asset and liability accounts are recorded by credits
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Increases in asset and owners equity accounts are recorded by debits
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Decreases in liability and owners equity accounts are recorded by debits
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Detailed explanation-1: -Debits increase asset or expense accounts and decrease liability, revenue or equity accounts. Credits do the reverse. When recording a transaction, every debit entry must have a corresponding credit entry for the same dollar amount, or vice-versa. Debits and credits are a critical part of double-entry bookkeeping.
Detailed explanation-2: -+ + Rules of Debits and Credits: Assets are increased by debits and decreased by credits. Liabilities are increased by credits and decreased by debits. Equity accounts are increased by credits and decreased by debits.
Detailed explanation-3: -On a balance sheet or in a ledger, assets equal liabilities plus shareholders’ equity. An increase in the value of assets is a debit to the account, and a decrease is a credit.
Detailed explanation-4: -A debit is an accounting entry that creates a decrease in liabilities or an increase in assets. In double-entry bookkeeping, all debits are made on the left side of the ledger and must be offset with corresponding credits on the right side of the ledger.