Understanding Journal Entries

What is a journal entry in accounting?

• A journal entry is a summary of all transactions for the month.

• A journal entry is a type of financial report.

• A journal entry is a method of calculating profits.

• A journal entry is a record of a financial transaction in accounting.

What is the rule for recording debits and credits?

• Debits decrease assets and increase liabilities; credits do the opposite.

• Debits increase assets/expenses and decrease liabilities/equity/revenues; credits do the opposite.

• Debits only apply to cash transactions, while credits apply to non-cash transactions.

• Debits and credits are interchangeable in all cases.

Name the three main types of accounts in accounting.

• Cash, Inventory, Sales

• Investments, Dividends, Retained Earnings

• Assets, Liabilities, Equity

• Revenue, Expenses, Profit

How do you record a sale transaction in the journal?

• Debit Cash and Credit Accounts Payable.

• Debit Inventory and Credit Sales Revenue.

• Debit Cash/Accounts Receivable and Credit Sales Revenue.

• Debit Sales Revenue and Credit Cash/Accounts Payable.

What is the effect of a debit on an asset account?

• A debit increases the asset account.

• A debit transfers the asset to a liability account.

• A debit has no effect on the asset account.

• A debit decreases the asset account.