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

When an asset or liability is initially recorded in the accounting system, which of the following is true?

Both assets and liabilities are credited.

Both assets and liabilities are debited.

An asset is credited and a liability is debited.

An asset is debited and a liability is credited.

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Verified step by step guidance

Understand the basic accounting principle: In double-entry accounting, every transaction affects at least two accounts, and the total debits must equal the total credits.

Recall the definitions: Assets represent resources owned by the company, and liabilities represent obligations owed by the company.

When an asset is acquired, it increases the company's resources. To record this increase, the asset account is debited (increased).

When a liability is incurred, it increases the company's obligations. To record this increase, the liability account is credited (increased).

Apply this principle to the problem: When an asset or liability is initially recorded, the asset is debited (to show an increase in resources), and the liability is credited (to show an increase in obligations).