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 statements about debits and credits in journal entries is NOT true?

Debits increase asset accounts and decrease liability accounts.

Debits always increase both asset and liability accounts.

Credits increase revenue accounts and decrease expense accounts.

Credits decrease asset accounts and increase equity accounts.

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Verified step by step guidance

Step 1: Understand the basic definitions of debits and credits in accounting. Debits are entries made on the left side of an account, while credits are entries made on the right side. They are used to record changes in accounts based on the accounting equation: Assets = Liabilities + Equity.

Step 2: Analyze the first statement: 'Debits increase asset accounts and decrease liability accounts.' This is true because debits increase assets (e.g., cash, inventory) and decrease liabilities (e.g., accounts payable).

Step 3: Analyze the second statement: 'Debits always increase both asset and liability accounts.' This is NOT true because debits increase asset accounts but decrease liability accounts. This statement contradicts the fundamental rules of debits and credits.

Step 4: Analyze the third statement: 'Credits increase revenue accounts and decrease expense accounts.' This is true because credits are used to record increases in revenue accounts (e.g., sales revenue) and decreases in expense accounts (e.g., rent expense).

Step 5: Analyze the fourth statement: 'Credits decrease asset accounts and increase equity accounts.' This is true because credits decrease asset accounts (e.g., cash) and increase equity accounts (e.g., retained earnings).