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 best describes the effect of a debit entry in accounting?

It decreases both assets and expenses.

It decreases assets and increases equity.

It increases assets and decreases liabilities.

It increases both liabilities and equity.

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Verified step by step guidance

Understand the concept of a debit entry: In accounting, a debit entry is an entry made on the left side of a ledger account. It typically increases asset and expense accounts while decreasing liability, equity, and revenue accounts.

Analyze the options provided: Carefully read each option and determine whether it aligns with the effect of a debit entry based on the rules of debit and credit in accounting.

Option 1: 'It decreases both assets and expenses.' - This is incorrect because a debit entry increases assets and expenses, not decreases them.

Option 2: 'It decreases assets and increases equity.' - This is incorrect because a debit entry does not increase equity; it decreases equity in cases like dividends or expenses.

Option 3: 'It increases assets and decreases liabilities.' - This is correct because a debit entry increases asset accounts (e.g., cash, accounts receivable) and decreases liability accounts (e.g., accounts payable, loans payable).