Multiple Choice
Which of the following transactions will increase the balance in a company's checking account?
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2. Transaction Analysis
Journal Entries: Debits and Credits
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Which type of account is increased with a credit?
A
Asset
B
Expense
C
Dividend
D
Liability
Verified step by step guidance1
Understand the basic accounting equation: Assets = Liabilities + Equity. This equation forms the foundation of double-entry accounting.
Learn the rules of debit and credit for different account types. Assets, Expenses, and Dividends are increased with debits, while Liabilities, Revenues, and Equity are increased with credits.
Analyze the question: It asks which type of account is increased with a credit. Based on the rules, liabilities are increased with credits.
Review examples of liability accounts, such as Accounts Payable, Notes Payable, and Unearned Revenue, to reinforce the concept.
Remember that credits decrease accounts like Assets, Expenses, and Dividends, while increasing accounts like Liabilities, Revenues, and Equity. This distinction is crucial for understanding double-entry accounting.
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