MGT 11A Ch.2 quiz

Describe the system of debits and credits and its use in recording transactions

Debit refers to left, and credit refers to right. Debits increase assets, expenses, and dividends while credits decrease them. Credits increase liabilities, common stock, and revenues; debits decrease them. Double-entry accounting means each transaction affects at least two accounts and has at least one debit and one credit. The system for recording debits and credits follows from the accounting equation. The left side of an account is the normal balance for assets, dividends, and expenses, and the right side is the normal balance for liabilities, common stock, and revenues

Debits increase __________________________

assets, expenses, and dividends while credits decrease them

debits refer to _____________ ___________

incoming money

Credits increase ___________________________

liabilities, common stock, and revenues; debits decrease them

credits refer to ____________ ___________

outgoing money

The Pearce Company recorded a transaction by debiting Accounts Receivable and crediting Sales Revenue. What event was being recorded?

sale of goods to a customer on account