Debit/Credit Rules

An increase to an Asset account (like Cash) is recorded with a...?

• credit

• debit

• expense

• withdrawal

Answer explanation

An increase to an Asset account, such as Cash, is recorded with a debit. This is because debits increase asset accounts, while credits decrease them.

An increase to a Liability account (like a Loan) is recorded with a...?

• expense

• debit

• credit

• withdrawal

Answer explanation

An increase to a Liability account, such as a Loan, is recorded with a credit. This is because liabilities increase on the credit side of the accounting equation.

An increase to a Revenue account is recorded with a...?

• withdrawal

• credit

• expense

• debit

Answer explanation

An increase to a Revenue account is recorded with a credit. In accounting, revenues are increased by credits and decreased by debits, making 'credit' the correct choice.

An increase to an Expense account is recorded with a...?

• withdrawal

• transfer

• credit

• debit

Answer explanation

An increase to an Expense account is recorded with a debit. In accounting, debits increase expense accounts, while credits decrease them.

A decrease to an Asset account is recorded with a...?

• asset increase

• cash withdrawal

• credit entry

• debit entry

Answer explanation

A decrease to an Asset account is recorded with a credit entry. In accounting, credits reduce asset accounts, while debits increase them.

A decrease to a Liability account is recorded with a...?

• withdrawal

• credit

• debit

• expense

Answer explanation

A decrease to a Liability account is recorded with a debit. In accounting, debits decrease liability accounts, while credits increase them.

The 'left side' of a T-account is always the...?

• liability side

• asset side

• debit side

• credit side

Answer explanation

The 'left side' of a T-account represents the debit side. In accounting, debits increase asset accounts and decrease liability accounts, making this the correct choice.

The 'right side' of a T-account is always the...?

• debit side

• credit side

• left side

• balance side

Answer explanation

The 'right side' of a T-account is always the credit side. In accounting, debits are recorded on the left side, while credits are recorded on the right side, making the credit side the correct answer.

Which of the following accounts normally has a DEBIT balance?

• Liability accounts

• Revenue accounts

• Equity accounts

• Asset accounts

Answer explanation

Asset accounts normally have a DEBIT balance because they represent resources owned by a business. In contrast, liability, revenue, and equity accounts typically have a CREDIT balance.

Which of the following accounts normally has a CREDIT balance?

• Assets

• Liabilities, Equity, Revenue

• Dividends

• Expenses

Answer explanation

Liabilities, Equity, and Revenue accounts normally have a CREDIT balance, reflecting obligations, ownership, and income respectively. In contrast, Assets, Dividends, and Expenses typically have a DEBIT balance.