2: Recording Trading Transactions

Question 1

What do debit entries represent

Answer 1

• increase in assets and expenses
• decreases in equity, liability and revenue

Question 2

What do credit entries represent

Answer 2

• increases in equity, liabilities and revenues
• decreases in assets and expenses

Question 3

What happens to an asset when it is used up

Answer 3

it becomes an expense

Question 4

What happens when an inventory is sold on credit in a sales revenue account

Answer 4

it is entered on credit side as a trade receivable

Question 5

Trade receivable

Answer 5

an amount owed by a customer to a business who has provided goods on credit

Question 6

Trade payable

Answer 6

an amount owed to a supplier from the business who has received goods on credit