Understanding Debit and Credit Rules

What is the basic rule of debit and credit?

• Debits and credits have no effect on assets or liabilities.

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

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

• Debits always equal credits regardless of the account type.

Which account type is increased by a debit?

• Equity accounts

• Liability accounts

• Revenue accounts

• Asset and Expense accounts

Which account type is decreased by a credit?

• Asset and Expense accounts

• Liability accounts

• Revenue accounts

• Equity accounts

What happens to asset accounts when they are debited?

• Asset accounts decrease when they are debited.

• Asset accounts remain unchanged when they are debited.

• Asset accounts increase when they are debited.

• Asset accounts are closed when they are debited.

What happens to liability accounts when they are credited?

• Liability accounts increase when they are credited.

• Liability accounts remain unchanged when they are credited.

• Liability accounts decrease when they are credited.

• Liability accounts are debited when they are credited.

Which of the following is an example of an asset?

• Revenue

• Expense

• Cash

• Liability

What is the effect of debiting an expense account?

• Debiting an expense account increases expenses.

• Debiting an expense account has no effect on expenses.

• Debiting an expense account decreases expenses.

• Debiting an expense account transfers funds to revenue.

How do you treat capital accounts in terms of debits and credits?

• Debits have no effect on capital accounts.

• Both debits and credits increase capital accounts.

• Credits increase capital accounts, and debits decrease them.

• Credits decrease capital accounts, and debits increase them.

What is the normal balance of a liability account?

• Revenue

• Debit

• Credit

• Equity

Which of the following increases a revenue account?

• Interest income

• Investment gains

• Loan repayments

• Sales revenue