Multiple Choice
Which of the following statements about debits is false?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
In the context of journal entries, which of the following best describes the effect of a debit entry?
A
It decreases assets and increases revenues.
B
It increases assets and decreases liabilities.
C
It increases liabilities and decreases expenses.
D
It increases both revenues and owner's equity.
Verified step by step guidance1
Understand the concept of a debit entry: In accounting, a debit entry is used to record increases in asset accounts and expense accounts, and decreases in liability accounts, equity accounts, and revenue accounts.
Analyze the options provided: Each option describes the effect of a debit entry on different types of accounts. You need to determine which description aligns with the fundamental rules of debits and credits.
Recall the accounting equation: Assets = Liabilities + Owner's Equity. A debit entry typically increases assets or expenses and decreases liabilities, equity, or revenues.
Match the correct description: Based on the rules of debits and credits, identify the option that states 'It increases assets and decreases liabilities,' as this aligns with the effect of a debit entry.
Confirm your understanding: Review the rules of debits and credits to ensure the selected option is consistent with the principles of financial accounting.
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