Acct 201: Thurs 6:50pm
Chapter 3 Homework
3. State briefly the rules of debit and credit as applied to asset accounts and as applied to liability and owner’s equity accounts. a. Debit: all asset accounts normally have debit balances. The increase was greater than the decreases and the result was a debit balance in the account. The fact that assets are located on ht left side of the balance sheet is a convenient means of remembering the rule that an increase in an asset is recorded on the left side and the asset account normally has a debit balance b. Credit: increases in liability and owners equity accounts are recorded by credit entries and decreases in these accounts are recorded by debits. The liabilities and owner’s equity belong on the right side of the balance sheet, whether there be a increase it will still reside on right hand side, and liabilities and owner’s equity accounts normally have a credit balance. 4. Does the term debit mean increase and the term credit mean decrease? a. An amount recorded on the left side of an account is called a debit. Any amount entered on the right side of the account is called a credit. The balance of an account is the difference between the debit and credit entries in the account. If the debit total exceeds the credit total, the account ahs a debit balance. If the credit total exceeds the debit total, the account has a credit balance. 5. What requirement is imposed by the double entry system in the recording of any business transaction? a. The rules for debit and credit are designed so that every transaction is recorded by equal dollar amounts of debits and credits. If this equation is to remain in balance any changes in the left side of the equation must be accompanied by an equal change in the right side. 8. What is the meaning of the term revenue? Does the receipt of cash by business indicate that revenue has been earned? a. Revenue is the price of goods sold and...
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