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 is possible for a particular business transaction in terms of debits and credits?

A transaction increases both an asset and a liability account by the same amount.

A transaction decreases both a liability and an equity account by the same amount.

A transaction increases both an expense and a revenue account by the same amount.

A transaction increases one asset account and decreases another asset account.

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Verified step by step guidance

Understand the basic accounting equation: Assets = Liabilities + Equity. This equation must always remain balanced after every transaction.

Recall the rules of debits and credits: Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts. Conversely, debits decrease liability, equity, and revenue accounts, while credits decrease asset and expense accounts.

Analyze each option provided in the problem to determine if it adheres to the accounting equation and the rules of debits and credits.

Option 1: 'A transaction increases both an asset and a liability account by the same amount.' This is possible because the increase in assets is balanced by the increase in liabilities, keeping the accounting equation balanced.

Option 4: 'A transaction increases one asset account and decreases another asset account.' This is also possible because the total assets remain unchanged, and the accounting equation remains balanced. This is an example of an asset exchange transaction.