Which of the following statements about recording journal entries is TRUE?

• A. Credits always decrease all types of accounts.
• B. Debits always increase all types of accounts.
• C. Every journal entry must have at least one debit and one credit.
• D. Journal entries are only required for cash transactions.

Answer: (C)

Verified step by step guidance

1. Understand the concept of journal entries: Journal entries are the fundamental building blocks of accounting, used to record financial transactions in the accounting system. Each journal entry must have at least one debit and one credit to maintain the accounting equation (Assets = Liabilities + Equity).
2. Clarify the role of debits and credits: Debits and credits do not universally increase or decrease all types of accounts. For example, debits increase asset and expense accounts but decrease liability, equity, and revenue accounts. Credits have the opposite effect, increasing liability, equity, and revenue accounts while decreasing asset and expense accounts.
3. Evaluate the statement 'Credits always decrease all types of accounts': This statement is false because credits increase certain accounts, such as liabilities, equity, and revenue accounts.
4. Evaluate the statement 'Debits always increase all types of accounts': This statement is false because debits decrease certain accounts, such as liabilities, equity, and revenue accounts.
5. Assess the statement 'Every journal entry must have at least one debit and one credit': This statement is true because journal entries must follow the double-entry accounting system, ensuring that the total debits equal the total credits for each transaction.