BOOK-KEEPING QUESTIONS Flashcards
We debit cash received, but credit cash paid
TRUE. Bank/cash is an asset, a debit balance. Increase bank when cash received, debit it. Decrease bank when cash paid, credit it
Sales are debited to a sales account, but purchases are credited to a purchase account
FALSE. Sales are income, a credit balance. To record sales, increase sales, credit it. Purchases are an expense, a debit balance. To record purchases, increase purchases, debit it
If a business purchases a car for cash we debit car account and credit bank account
TRUE. Car is a fixed asset, a debit balance. Bank is a current asset, a debit balance
Purchases, hotel, electricity and wages are all debits in a trial balance
TRUE. Hotel, fixed asset is a debit balance
Sales, rent paid and capital are all credits in the trial balance
FALSE. Rent paid is an expense, a debit balance
Assets and Expenses are debit balances. Liabilities, Capital and Income are credit balances. A debit entry will:
Increase assets and expenses or decrease liabilities and income
Assets –Liabilities = Capital. If assets are increased (debit entry), to keep the equation in balance: options are liabilities are increased (credit entry), capital is increased (credit entry) or other assets are decreased (credit entry). Therefore: An increase in assets may have an equivalent:
Increase in liabilities (increase in other assets would require a debit entry. Decrease in liabilities would require a debit entry; decrease in capital would require a debit entry)
Assets –Liabilities = Capital. If Liabilities are increased (credit entry), to keep the equation in balance: options are assets are increased (debit entry), capital is decreased (debit entry) or other liabilities decreased (debit entry). Therefore: An increase in liabilities may have an equivalent:
Decrease in other liabilities (decrease in assets would require a credit entry. Increase in capital and other capital would require a credit entry)
