Which of the following is possible for a particular business transaction in terms of debits and credits?

• A. A transaction increases both an asset and a liability account by the same amount.
• B. A transaction decreases both a liability and an equity account by the same amount.
• C. A transaction increases both an expense and a revenue account by the same amount.
• D. A transaction increases one asset account and decreases another asset account.

Answer: (D)

Verified step by step guidance

1. Understand the basic accounting equation: Assets = Liabilities + Equity. This equation must always remain balanced after every transaction.
2. Recall the rules of debits and credits: Debits increase asset and expense accounts, while credits increase liability, equity, and revenue accounts. Conversely, debits decrease liability, equity, and revenue accounts, while credits decrease asset and expense accounts.
3. Analyze each option provided in the problem to determine if it adheres to the accounting equation and the rules of debits and credits.
4. Option 1: 'A transaction increases both an asset and a liability account by the same amount.' This is possible because the increase in assets is balanced by the increase in liabilities, keeping the accounting equation balanced.
5. Option 4: 'A transaction increases one asset account and decreases another asset account.' This is also possible because the total assets remain unchanged, and the accounting equation remains balanced. This is an example of an asset exchange transaction.