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 is true with regard to journal entries?

Debits always increase all types of accounts.

Every journal entry must have total debits equal to total credits.

A journal entry can have only one account affected.

Credits always decrease all types of accounts.

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Verified step by step guidance

Understand the purpose of journal entries: Journal entries are used to record financial transactions in the accounting system. Each transaction affects at least two accounts and follows the double-entry accounting principle.

Review the double-entry accounting principle: This principle states that every transaction must have equal debits and credits to maintain the accounting equation (Assets = Liabilities + Equity).

Analyze the statement 'Debits always increase all types of accounts': This is incorrect because debits increase asset and expense accounts but decrease liability, equity, and revenue accounts.

Analyze the statement 'Credits always decrease all types of accounts': This is incorrect because credits increase liability, equity, and revenue accounts but decrease asset and expense accounts.

Evaluate the statement 'Every journal entry must have total debits equal to total credits': This is correct because it ensures the accounting equation remains balanced. A journal entry can affect multiple accounts, but the total debits must always equal the total credits.