Basics

Question 1

Credits increase which account(s)?

Answer 1

Credits increase Liabilities, Revenues and Shareholder Equity.

Question 2

Credits decrease which account(s)?

Answer 2

Credits decrease Asset, Expense and Dividend Accounts.

Question 3

Debits increase which account(s)?

Answer 3

Debits increase Asset, Expense and Dividend Accounts.

Question 4

Debits decrease which account(s)?

Answer 4

Debits decrease Liability, Revenue, and Shareholder Equity accounts.

Question 5

A decrease in a revenue account is a (debit/credit)?

Answer 5

A decrease in a Revenue Account is a debit.

Question 6

A decrease in an Expense Account is a (debit/credit)?

Answer 6

A credit decreases expenses.

Question 7

What are the balance sheet (“real” / “permanent”) accounts?

Answer 7

Balance Sheet Accounts:

• Assets
• Liabilities
• Shareholders’ Equity

Question 8

What are the Income Statement (temporary/nominal) accounts?

Answer 8

Income Statement Accounts:

• Revenues
• Expenses

Question 9

Why are balance sheet accounts also called real or permanent accounts?

Answer 9

Balance sheet accounts are also called real or permanent accounts because they don’t get closed to any other account at the end of the accounting period.

Question 10

Why are Income Statement accounts also called nominal or temporary accounts?

Answer 10

Income Statement accounts are also called nominal or temporary because the really only exist in name, as they are subdivisions of the Shareholders’ Equity accounts and get closed to it/ Retained Earnings at the end of the period.

Question 11

What’s the definition of revenue?

Answer 11

An inflow of economic benefits that arises from ordinary business activities.