Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following best describes the effect of a credit entry in accounting?

Increases a liability or equity account

Decreases an asset account

Increases an asset account

Decreases a liability account

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Verified step by step guidance

Understand the concept of a credit entry in accounting: A credit entry is used to record increases in liability or equity accounts and decreases in asset accounts. It is part of the double-entry accounting system, where every transaction affects at least two accounts.

Review the effect of a credit entry on liability accounts: A credit entry increases the balance of liability accounts, such as accounts payable or loans payable.

Review the effect of a credit entry on equity accounts: A credit entry increases the balance of equity accounts, such as retained earnings or common stock.

Review the effect of a credit entry on asset accounts: A credit entry decreases the balance of asset accounts, such as cash or accounts receivable.

Eliminate incorrect options based on the above understanding: The correct description of a credit entry is that it increases a liability or equity account and decreases an asset account. The other options (increases an asset account or decreases a liability account) do not align with the effect of a credit entry.