Multiple Choice
Which of the following is the correct journal entry to record the reimbursement of the petty cash fund when expenses have been incurred and paid from petty cash?
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
For each of the following accounts, indicate the effect of a debit and a credit. Which of the following correctly describes the effect of a debit and a credit on an asset account?
A
A debit decreases an asset account; a credit increases it.
B
Both a debit and a credit increase an asset account.
C
A debit increases an asset account; a credit decreases it.
D
Both a debit and a credit decrease an asset account.
Verified step by step guidance1
Understand the basic accounting principle: In double-entry accounting, every transaction affects at least two accounts, and each account has a debit and credit side.
Learn the normal balance of an asset account: Asset accounts typically have a debit balance, meaning they increase with debits and decrease with credits.
Analyze the options provided: Evaluate each statement based on the normal balance of an asset account. For example, 'A debit increases an asset account; a credit decreases it' aligns with the normal behavior of asset accounts.
Compare the other options: For instance, 'A debit decreases an asset account; a credit increases it' contradicts the normal balance rule, so it is incorrect.
Conclude the correct description: Based on the analysis, the correct effect of a debit and credit on an asset account is that a debit increases the account, while a credit decreases it.
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