Multiple Choice
Which of the following is an asset source transaction?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
Which of the following statements is correct regarding debiting and crediting an account?
A
Crediting an expense account increases its balance.
B
Debiting an asset account increases its balance.
C
Crediting a revenue account decreases its balance.
D
Debiting a liability 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. Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts.
Analyze the first statement: 'Crediting an expense account increases its balance.' This is incorrect because expense accounts increase with debits, not credits.
Evaluate the second statement: 'Debiting an asset account increases its balance.' This is correct because asset accounts increase with debits and decrease with credits.
Review the third statement: 'Crediting a revenue account decreases its balance.' This is incorrect because revenue accounts increase with credits, not decrease.
Assess the fourth statement: 'Debiting a liability account increases its balance.' This is incorrect because liability accounts increase with credits, not debits.
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