Multiple Choice
Which of the following is the correct journal entry to record the reinstatement of an account receivable that was previously written off under the allowance method?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
A business uses a credit to record which of the following?
A
An increase in a liability account
B
A decrease in a revenue account
C
A decrease in a capital account
D
An increase in an asset account
Verified step by step guidance1
Understand the concept of 'credit' in accounting: In double-entry accounting, a credit is one side of a transaction that either increases or decreases specific types of accounts. It is important to know which accounts are affected by credits.
Recall the rules of debit and credit: Credits increase liabilities, equity, and revenue accounts, while they decrease assets and expenses. This is a fundamental rule in accounting.
Analyze the options provided: Evaluate each option to determine whether it aligns with the rule of credits. For example, an increase in a liability account is consistent with the rule that credits increase liabilities.
Eliminate incorrect options: For instance, a decrease in a revenue account is not correct because credits increase revenue accounts. Similarly, a decrease in a capital account is incorrect because credits increase equity (capital).
Select the correct answer: Based on the analysis, the correct answer is 'An increase in a liability account,' as this aligns with the rule that credits increase liabilities.
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