Ep4 - Debit and Credit

Which of the following is a liability of a firm?

• An office building owned by the firm.

• Inventories for sale stored in the warehouse.

• Money which the firm has borrowed and has not yet been repaid.

• Money owed to the firm by its customers.

An example of an asset is:

• Machinery owned

• Money owed by the firm to one of its suppliers for goods purchased

• An overdrawn bank balance

• The capital of the firm

Identify the incorrect statement.

• Assets - Liabilities = Equity

• Equity - Liabilities =Assets

• Assets = Equity + Liabilities

• Assets - Equity = Liabilities

Which of the following statements is correct?

• To record an increase in any given asset account, the account must be debited.

• To record a decrease in capital, the capital account must be credited.

• To record an increase in any given liability account, the account must be debited.

• To record a decrease in any given liability account, the account must be credited.

The left side of an account is used to record:

• Debit or credit, depending on the type of account.

• Credits

• Debits

• Increases

Which is false concerning the rules of debit and credit?

• The left side of an account is always the debit side and the right side is always the credit side.

• The word “debit” means to increase and the word “credit” means to decrease.

• Increases in assets and expenses are debit entries and increase the liabilities, equality, and revenue are credit entries.

• The normal balance of any account appears on the side for recording increases.

A credit entry decreases the balance of

• Assets

• Income

• Liabilities

• Owner’s equity

Debits

• Decrease assets and expenses and increase liabilities, revenue, and owner’s equity

• Increase assets and decrease expenses, liabilities, revenue and owner’s equity

• Increase assets and expenses and decrease liabilities, revenue and owner’s equity

• Increase assets and owner’s equity and decrease liabilities, expenses, and revenue

They represent the claims of creditors and owners over the asset of the enterprise

• Assets

• Liabilities

• Equities

• Capital

Which of the following is not true?

• Debit is the value received in a business transaction.

• Credit is always the equal to debit in an accounting equation.

• The debit is always on the left hand side of the accounting equation.

• Assets are normally on the credit side of the accounting equation.