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

In the context of recording journal entries, which of the following statements correctly describes the effect of a debit entry?

A debit decreases asset accounts and increases liability accounts.

A debit increases both asset and liability accounts.

A debit decreases both asset and expense accounts.

A debit increases asset accounts and decreases liability accounts.

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Verified step by step guidance

Understand the basic rules of debits and credits: In accounting, a debit entry increases asset and expense accounts, while it decreases liability, equity, and revenue accounts.

Analyze the statement provided: The problem asks which statement correctly describes the effect of a debit entry. Review each option carefully to determine its accuracy based on the rules of debits and credits.

Evaluate option A: 'A debit decreases asset accounts and increases liability accounts.' This is incorrect because a debit increases asset accounts, not decreases them, and it decreases liability accounts, not increases them.

Evaluate option B: 'A debit increases both asset and liability accounts.' This is incorrect because a debit increases asset accounts but decreases liability accounts.

Evaluate option C: 'A debit decreases both asset and expense accounts.' This is incorrect because a debit increases both asset and expense accounts. The correct answer is: 'A debit increases asset accounts and decreases liability accounts,' as it aligns with the fundamental rules of debits and credits.