In double-entry bookkeeping, which balances are normally debited for assets and expenses and credited for liabilities, equity, and revenue?

In double-entry bookkeeping, which balances are normally debited for assets and expenses and credited for liabilities, equity, and revenue?

• A. Debit: Assets and expenses; Credit: Liabilities, equity, and revenue
• B. Debit: Assets and revenue; Credit: Liabilities and expenses
• C. Debit: Revenue and liabilities; Credit: Assets and expenses
• D. Debit: Assets, expenses, and revenue; Credit: Liabilities and equity

Answer: (A)

The basic rule being tested is how debits and credits affect different types of accounts in double-entry bookkeeping. Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts. Because of this, assets and expenses normally carry debit balances, and liabilities, equity, and revenue normally carry credit balances. So when recording transactions, you debit accounts that are assets or expenses to reflect an increase, and you credit accounts that are liabilities, equity, or revenue to reflect an increase in those areas. For example, purchasing supplies raises an asset (supplies) with a debit and may lower another asset (cash) with a credit, while earning revenue increases the revenue account with a credit (and increases an asset like cash or accounts receivable with a debit). Expenses are increased with a debit, and the corresponding credit typically goes to cash or another asset or to a liability if unpaid. The idea that revenue or any of the liability/equity/revenue accounts should be debited rather than credited would contradict these standard balances.

The basic rule being tested is how debits and credits affect different types of accounts in double-entry bookkeeping. Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts. Because of this, assets and expenses normally carry debit balances, and liabilities, equity, and revenue normally carry credit balances.

So when recording transactions, you debit accounts that are assets or expenses to reflect an increase, and you credit accounts that are liabilities, equity, or revenue to reflect an increase in those areas. For example, purchasing supplies raises an asset (supplies) with a debit and may lower another asset (cash) with a credit, while earning revenue increases the revenue account with a credit (and increases an asset like cash or accounts receivable with a debit). Expenses are increased with a debit, and the corresponding credit typically goes to cash or another asset or to a liability if unpaid.

The idea that revenue or any of the liability/equity/revenue accounts should be debited rather than credited would contradict these standard balances.