Concept explainers
Asset: It refers to all valuable items that a company owns or items that generate some income to the company whether tangible or intangible. The more assets a company owns, the stable its financial position would be.
Accounting rule for assets is,
- Increase in assets is always debited
- Decrease in assets is always credited.
Liability: It refers to all items that have some monetary value in market and that company owes from others. The liability is much important for a company for financial support.
Accounting rule for liabilities is,
- Increase in liabilities is always credited.
- Decrease in assets is always credited.
Equity: It refers to the contribution that an owner makes to the company. The more equity the company has, the more profitable the company would be.
Accounting rule for equity is,
- Increase in Equity is always credited.
- Decrease in equity is always debited.
To classify: Items into asset (A) account, liability (L) account and equity (EQ) account.
Want to see the full answer?
Check out a sample textbook solutionChapter 2 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- What is an account receivable? O a. Sales O b. Asset Oc. Income O d. Creditorsarrow_forwardA summarized statement of transactions relating to a particular person, item expense or income. a. chart of accounts b. voucher c. accounts d. invoicearrow_forwardExplain how the accounting equation organizes financial information using T-accounts and debits and credits.arrow_forward
- Explain what is meant by the term real accounts (also known as permanent accounts).arrow_forwardestion A "receipt on account" results in a credit to: An A/P account Bank An A/R account Capitalarrow_forwardQuestion 11 A statement listing customers, account balances, and total amount due from all customers is a/an: Accounts payable ledger. Accounts receivable ledger. Schedule of accounts payable. O Schedule of accounts receivable.arrow_forward
- State which account title the following terminologies belong: A. Asset account title, B. Liability Account Title C. Income Account title D. Expense Account title E. Capital Account title 1. Sales 2. Drawing 3. Cash 4. Accounts Receivable 5. Notes Payable 6. Inventory 7. Salaries and Wages 8. Salaries Payable 9. Taxes and Licenses 10. Notes Receivablearrow_forwardSUBJECT: Financial Accounting and Reporting Instruction: Choose the Debit and Credit Accounts of the following transactions. TRANSACTION: Purchased supplies on account1. Debit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation 2. Credit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation TRANSACTION: Paid travelling expenses to pay business permit3. Debit *a. Cash In Bankb. Accounts Receivablec. Unused Laundy Suppliesd. Prepaid Insurancee. Equipmentf. Accounts Payableg. Unearned Incomeh. Amora, Drawingi. Amora, Capitalj. Service Incomek. Salaries ExpenseL.Taxes and Licensesm.Transportation 4. Credit *a. Cash In Bankb.…arrow_forwardWhich item will appear on the credit side of the ledger account? a. Salary b. Drawings c. Service revenue d. Accounts receivablearrow_forward
- The income statement is drawn up from the figures in the _________________ Select one: a. Accounts Receivable ledger b. Accounts payable ledger c. Trial Balance d. Cash Flow Statementarrow_forwardWhich of the following best describes the classification and normal balance of the accounts receivable account? Select one: a. Asset, Debit b. Liability, credit c. Revenue, credit d. Owner's equity, debitarrow_forwardDate General Account Titles and Explanations Ref. Debit Creditarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College