Multiple Choice
Given a statement of an employee's biweekly earnings, which of the following journal entries correctly records the payment of wages to the employee?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following statements about debits and credits in journal entries is correct?
A
Debiting a liability account increases its balance.
B
Debiting an asset account increases its balance.
C
Crediting a revenue account decreases its balance.
D
Crediting an expense account increases its balance.
Verified step by step guidance1
Understand the basic rules of debits and credits: In accounting, debits and credits are used to record transactions in the journal. Debits are recorded on the left side of an account, and credits are recorded on the right side. Each type of account (assets, liabilities, equity, revenue, and expenses) behaves differently when debited or credited.
Analyze the behavior of asset accounts: Asset accounts increase when debited and decrease when credited. This is because assets represent resources owned by the business, and adding to them (debiting) increases their value.
Analyze the behavior of liability accounts: Liability accounts increase when credited and decrease when debited. This is because liabilities represent obligations, and adding to them (crediting) increases the amount owed.
Analyze the behavior of revenue accounts: Revenue accounts increase when credited and decrease when debited. This is because revenue represents income earned by the business, and adding to it (crediting) increases the total revenue.
Analyze the behavior of expense accounts: Expense accounts increase when debited and decrease when credited. This is because expenses represent costs incurred by the business, and adding to them (debiting) increases the total expenses.
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