Which of the following is true about a "credit"? a) It is part of the double-entry procedure that keeps the accounting equation in balance. b) It represents a decrease to assets. c) It represents an increase to liabilities. d) It is on the right side of a T-account.

Question

Titus Lee

Business

22 June, 11:13

Which of the following is true about a "credit"? a) It is part of the double-entry procedure that keeps the accounting equation in balance. b) It represents a decrease to assets. c) It represents an increase to liabilities. d) It is on the right side of a T-account.

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Answers (1)

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Lewis Kidd · Answer 1

All of them.

Explanation:

Accounting systems are designed to show the increases and decreases in each financial statement item as a separate record. This record is called an account. In the T account, the debit is on the left and the credit is on the right.

The equity for credits and debits for each transaction is build into the accounting equation: assets = liabilities + equity. Because of this doble equality, this system is called double entry accounting system.

In balance sheet accounts:

-asset accounts debit for increases and credit for decreases.

-liability accounts debit for decreases and credit for increases.

-equity accounts debit for decreases and credit for increases.