Accounting_Chapter 2 Review

What is the purpose of debits and credits in accounting?

• Debits and credits are used to calculate profit and loss.

• Debits and credits are used to manage employee payroll.

• Debits and credits are used to determine the value of assets and liabilities.

• Debits and credits are used to record and track financial transactions.

Which account(s) increase with a debit?

• Liabilities

• Assets

• Ryan Reynolds, Capital

• Expenses

__________ on the left, ___________ on the right, ________ left, _________ right, __________ left, ________ right (Sing it people!)

• debit, credit, debit, credit, debit, credit

• debit, debit, credit, credit, debit, credit

• credit, debit, debit, credit, credit, debit

• debit, debit, credit, credit, debit, debit

What is the normal balance for assets?

• liabilities

• zero

• credit

• debit

What is the normal balance for liabilities?

• debit

• zero

• positive

• credit

What is the normal balance for Ryan Reynolds, Drawing?

• credit

• debit

• asset

• zero

What is the normal balance for expense accounts?

• debit

• asset

• zero balance

• credit

What happens when a debit entry is made to an expense account?

• The balance of the expense account decreases and the overall profit or income increases.

• The balance of the expense account remains the same and the overall profit or income remains unchanged.

• The balance of the expense account decreases and the overall profit or income also decreases.

• The balance of the expense account increases and the overall profit or income decreases.

What happens when a credit entry is made to an asset account?

• The balance of the asset account decreases.

• The balance of the asset account increases.

• The asset account is closed.

• The asset account remains unchanged.