Fundamentals of Debits and Credits

What is the effect of debiting an asset account?

• Decrease in the account

• Increase in the account

• No change to the account

• The account becomes a liability

When a company pays off its accounts payable, what happens to the cash account?

• It is debited

• It is credited

• It remains unchanged

• It is either debited or credited, depending on the payment method

In double-entry bookkeeping, if you debit one account, what must you do to another account?

• Debit it

• Credit it

• Either debit or credit, depending on the situation

• No action is required

Which of the following statements is true regarding debits and credits?

• Debits always increase account balances and credits always decrease them

• Credits always increase account balances and debits always decrease them

• Debits and credits can either increase or decrease an account balance, depending on the type of account

• Debits and credits have no effect on account balances

What is the normal balance of an expense account?

• Debit

• Credit

• Either debit or credit, depending on the expense

• Expense accounts do not have a normal balance

If a company receives cash from a customer for a service not yet performed, which accounts are affected?

• Debit Cash, Credit Accounts Receivable

• Debit Cash, Credit Service Revenue

• Debit Unearned Revenue, Credit Cash

• Debit Cash, Credit Unearned Revenue

What is the normal balance for a revenue account?

• Debit

• Credit

• Neither debit nor credit

• The normal balance can be either debit or credit

When a company purchases equipment on credit, which of the following occurs?

• Debit Equipment, Credit Cash

• Debit Equipment, Credit Accounts Payable

• Debit Accounts Payable, Credit Equipment

• Debit Cash, Credit Equipment

What does it mean if an account is "credited"?

• The account balance has decreased

• The account balance has increased

• It depends on whether the account is an asset, liability, or equity account

• Money has been added to the account

In accounting, what is the fundamental equation that represents the relationship between assets, liabilities, and equity?

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

• Assets - Liabilities = Equity

• Assets + Equity = Liabilities